Chapter III INCIDENCE AND LEVY OF TAX

1. (1) Every dealer registered or liable to be registered under this Act, (other than a casual trader, a non-resident dealer) whose total turnover for a year exceeds rupees ten lakhs and every casual trader or agent of a non-resident dealer, whatever be his turnover for the year, shall pay a tax on the taxable turnover in each tax period at the rate and at the point as specified in the Schedules.
2. (2) Notwithstanding anything contained in sub-section (1), every dealer, other than,
   • (i) a casual trader, or
   • (ii) a non-resident dealer or its agent, or
   • (iii) a dealer in Indian Made Foreign Liquor, whose total turnover for a year exceeds rupees ten lakhs, shall not be liable to pay tax on the first ten lakhs of rupees of his total turnover, provided that no amount by way of tax or purporting to be by way of tax has been collected by him under this Act in respect of that first ten lakhs of rupees.
3. (3) The spares and accessories to the goods specified in the Schedules shall be taxable at the same rate as applicable to the goods whether specifically mentioned therewith or otherwise.
4. (4) When goods are sold in containers or packed in any packing material, the rate of tax applicable to such containers or packing materials, as the case may be, shall, whether the price of the containers or packing materials is charged separately or not, be the same as those applicable to the goods contained or packed therein and the turnover in respect of such containers and packing materials shall be included in the turnover of such goods.
5. (5) When goods contained in container or packed in packing material is exempt from tax, then the sale of such containers or packing materials shall also be exempt from tax.
6. (6) Notwithstanding anything contained in this Act, every dealer registered under sub-section
7. (3) of section 7 of the Central Sales Tax Act, 1956 shall, whatever be the quantum of his turnover, pay tax, for each year, in respect of the sale of the goods with reference to the purchase of which he has furnished a declaration under sub-section
8. (4) of section 8 of the said Central Act, in accordance with the provisions of this Act.

1. (1) Every dealer who executes any works contract shall be liable to pay tax on the sale value of goods involved in the execution of works contract whether or not the transfer of property on such goods occurred in the same form or in some other form, at the rate specified in Schedules for such goods.
2. (2) However the dealer executing works contract may opt to pay tax by way of composition a tax at four per cent on seventy per cent of the value of the consideration received or receivable. Such option shall be in force for a period of not less than three years.
3. (3) Deduction of tax at source in works contract.
   • (i) Notwithstanding anything contained in this Act, every person responsible for paying any sum to any dealer for execution of works contract shall, at the time of payment of such sum, deduct an amount calculated, at the rates as specified under section 14 or as specified in sub-section
4. (2) of this section: Provided that no deduction under clause
   • (i) shall be made where
   • (a) no transfer of property in goods (whether as goods or in some other form) is involved in the execution of works contract; or
   • (b) transfer of property in goods (whether as goods or in some other form) is involved in the execution of works contract in the course of inter-State trade or commerce or in the course of import; or
   • (c) the dealer produces a certificate in such form as may be prescribed from the assessing authority concerned that he has no liability to pay or has paid the tax under section 14 or under sub-section
5. (2) of this section, as the case may be. Explanation.- For the purpose of this section,
   • (I) the term 'person' shall include
   • (i) the Central or a State Government or a Union Territory Administration including National Capital Territory of Delhi;
   • (ii) a local authority;
   • (iii) a corporation or body established by or under a Central or State Act or under any law passed by the Union Territory Legislature;
   • (iv) a company incorporated under the Companies Act, 1956 including a Central or State Government undertaking;
   • (v) a society including a co-operative society;
   • (vi) an educational institution; or
   • (vii) a trust;
   • (II) the term 'civil works contract' includes civil works of construction of new buildings, bridge, road, runway, dam or canal including any lining, tiling, painting or decorating which is an inherent part of the new construction and any repair, maintenance, improvement or upgradation of such civil works by means of fixing and laying all kinds of floor tiles, mosaic tiles, slabs, stones, marbles, glazed tiles, painting, polishing, partition, wall panelling, interior decoration, false ceiling, carpeting and extra fittings, or any manner of improvement on an existing structure.
   • (ii) Any person making such deduction shall deposit the sum so deducted to such authority, in such manner and within such time, as may be prescribed.
   • (iii) Any person who makes the deduction and deposit, shall within fifteen days of such deposit, issue to the said dealer a certificate in the prescribed form for each deduction separately, and send a copy of the certificate of deduction to the assessing authority, having jurisdiction over the said dealer together with such documents, as may be prescribed.
   • (iv) On furnishing a certificate of deduction referred to in clause (iii), the amount deposited under clause (ii), shall be adjusted by the assessing authority towards tax liability of the dealer under section 14 or this section as the case may be, and shall constitute a good and sufficient discharge of the liability of the person making deduction to the extent of the amount deposited: Provided that the burden of proving that the tax on such works contract has already been deposited and of establishing the exact quantum of tax so deposited shall be on the dealer claiming the deduction.
   • (v) Any person who contravenes the provisions of clause
   • (i) or clause (ii), shall pay, in addition to the amount required to be deducted and deposited, penalty at two per cent per month of such amount for the entire period of default.
   • (vi) Where the dealer proves to the satisfaction of the assessing authority that he is not liable to pay tax under section 14 or under sub-section
6. (2) of this section, the assessing authority shall refund the amount deposited under clause (ii), after adjusting the arrears of tax, if any, due from the dealer, in such manner as may be prescribed.
   • (vii) The tax or penalty or interest under this section shall become due without any notice of demand on the date of accrual for the payment by the person as provided under clauses
   • (i) and (ii).
   • (viii) If any person contravenes the provisions of clause
   • (i) or clause (ii), the whole amount of tax payable shall be recovered from such person and all provisions of this Act for the recovery of tax including those relating to levy of penalty and interest shall apply, as if the person is an assessee for the purpose of this Act.

1. (1) Input Tax Credit (ITC)ó For the purpose of calculating the net tax
   • (VAT) payable by a dealer for each tax period, an input tax credit shall be allowed against the output tax subject to such conditions or restrictions or adjustments, if any, as may be prescribed for the purposes of this section: Provided that,ó
     • (i) for all capital goods except those provided under sub-section(2), the input tax credit shall be allowed in three years by equal monthly instalments commencing from the month following the commencement of commercial production or sale of taxable goods;
     • (ii) when the input is transferred, either in same form or otherwise, other than by way of sale and if such transfer is outside the Union Territory, the input tax credit shall be allowed for the input tax paid in excess of the rate prescribed under sub-section
2. (1) of section 8 of the Central Sales Tax Act,1956.
3. (2) The input tax credit shall not be allowed,ó
   • (i) when the input is used for manufacture of exempted goods;
   • (ii) when the goods purchased are consumed for own use (i.e) not connected with the business of the dealer;
   • (iii) in respect of following goods:ó
   • (a) Indian Made Foreign Liquor;
   • (b) sugarcane (sugarcane is taxable at the point of purchase and such purchase tax is not eligible for input tax credit);
   • (c) all kinds of pan masala with or without tobacco;
   • (d) narcotics;
   • (e) civil structure and immovable goods or properties;
   • (f) building material used in construction activity, except when used by a works-contractor;
   • (g) office equipment;
   • (h) capital goods purchased prior to the date of commencement of this Act or capital goods purchased by dealers in IMFL, rectified spirit, narcotics, pan masala with or without tobacco after the commencement of this Act;
     • (i) petrol, diesel, aviation turbine fuel and other motor spirit;
   • (j) Molasses; and
   • (k) Rectified spirit;
     • (iv) for goods purchased prior to twelve months from the date of commencement of this Act: Provided that input tax credit will be allowed for the stock held on the date of commencement of this Act subject to such terms and conditions as may be prescribed: Provided further that such goods are falling within the list of goods specified in Part-A of the Second Schedule, Part-A of the Third Schedule or Part-A of the Fourth Schedule to this Act ;
     • (v) for goods purchased from non-taxable dealers;
     • (vi) for goods purchased from a dealer paying tax on compounded rate, as provided under sub-section
4. (2) of section 15 and under section 19 of this Act; and
   • (vii) for a casual trader.
5. (3) The input tax credit shall, at no time, exceed the amount of tax payable at the prescribed rate in Schedule applicable to the input.
6. (4) Where the dealer has not adjusted the input tax credit or has not made a claim for refund within the prescribed period from the date of accrual of such input tax credit, such credit shall lapse to Government.
7. (5) Where input tax credit is availed by a dealer on a taxable purchase and such input tax credit shall be liable for reversal in such circumstances and subject to such conditions as may be prescribed.
8. (6) No registered dealer shall be entitled to input tax credit in respect ofó
   • (a) goods purchased and accounted for in business but utilized for the purpose of providing facility to the proprietor or partner or Director including employees and in any residential accommodation; or
   • (b) purchase of all automobiles including commercial vehicles, two wheelers and three wheelers and spare parts for repair and maintenance thereof, unless the registered dealer is in the business of dealing in such automobile or spare parts; or
   • (c) purchase of airconditioning units unless the registered dealer is in the business of dealing in such units.
9. (7) No input tax credit shall be allowed to any registered dealer in respect of any goods purchased by him for sale but given away by him by way of free sample or gift or goods consumed for personal use.
10. (8) No input tax credit shall be available to a registered dealer for tax paid or payable at the time of purchase of goods, if suchó
    • (i) goods are not sold because of any theft, loss or destruction for any reason, including natural calamity. If a dealer has already availed input tax credit against purchase of such goods there shall be reversal of tax credit; or
    • (ii) inputs destroyed in fire accident or lost while in storage even before use in the manufacture of final products; or
    • (iii) inputs damaged in transit or destroyed at some intermediary stage of the manufacture.
11. (9) Calculation of taxable turnover when sale price is inclusive of tax.ó Notwithstanding the provisions in clause
    • (zj) of section 2, when sale price shown in a tax invoice is inclusive of tax, the taxable turnover for that invoice may be calculated applying the following formula, namely:- Tax inclusive of sale proceeds x 100 óóóóóóóóóóóóóóóóóóóó (100 + Rate of Tax)

1. (1) Where a tax at the point of last purchase in the Union Territory has been levied and collected under this Act in respect of goods liable to tax at such point and where the said purchase ceases to be the last purchase in the Union Territory by reason of a subsequent purchase of such goods by another dealer in the Union Territory, the tax so levied and collected shall be refunded to the dealer concerned in such manner and subject to such conditions as may be prescribed.
2. (2) The Government may, by rules made under this section, provide for refund of tax levied and collected under this Act on any taxable goods in the series of sales or purchases.

The provisions of this Act relating to taxation of successive sales or purchases inside the Union Territory shall apply only to sales or purchases inside the Union Territory (other than sales or purchases in the course of inter-State trade or commerce) and the tax under this Act shall be levied in addition to any tax levied under the Central Sales Tax Act, 1956 or any other law for the time being in force.

1. (1) Notwithstanding anything contained in section 14, the dealer whose sales turnover under this Act and under the Central Sales Tax Act, 1956 does not exceed to rupees fifty lakhs in a year may at his option, instead of paying the tax at the rates specified in the Schedules, pay by way of composition, tax at the rate of 0.25 per cent of his taxable turnover: Provided that,
   • (i) such dealer will not be eligible for input tax credit; and
   • (ii) the dealers in the following goods are not eligible to exercise the option under this section,ó
   • (a) Indian Made Foreign Liquor,
   • (b) sugarcane,
   • (c) all kinds of pan masala with or without tobacco,
   • (d) narcotics, and
   • (e) rectified spirit.
2. (2) Any dealer other than a casual trader who estimates his sales turnover under this Act and under the Central Sales Tax Act, 1956 for a year to be not more than rupees fifty lakhs, may apply to the assessing authority to be permitted to pay the tax under this section and on being so permitted, he shall pay the tax due during the year in monthly or in prescribed instalments and for that purpose, shall submit such returns in such manner as may be prescribed: Provided that any dealer paying tax under any other section and desirous of paying tax for any year under this section may, at any time, within one month of the commencement of that year, exercise his option to pay tax under this section and for that purpose shall submit such returns in such manner as may be prescribed: Provided further that any dealer paying tax under this section and desirous of paying tax under any other sections may, at any time, within one month of the commencement of that year, exercise his option to pay tax in accordance with that sub-section or section and for that purpose shall submit such returns in such manner as may be prescribed.
3. (3) The permission granted by the assessing authority under sub-section
4. (2) shall continue in force so long as the dealer is eligible to be assessed under this section and has not withdrawn his option to be so assessed: Provided that during the course of a year if the turnover of any dealer, permitted to be assessed under this section, exceeds rupees fifty lakhs, the permission so granted shall be deemed to have been cancelled from the end of that tax period in which his sales turnover under this Act and under the Central Sales Tax Act, 1956 so exceeded.
5. (4) The tax paid under sub-section
6. (2) shall be subject to such adjustment as may be prescribed.
7. (5) A dealer who has been permitted to pay the tax under sub-section
8. (2) shall not collect any amount by way of tax or purporting to be by way of tax on the sales so long as he opts to pay the tax as provided under sub-section (1).

Subject to such restrictions and conditions as may be prescribed, a dealer who deals in the goods specified in the First Schedule shall not be liable to pay any tax under this Act in respect of such goods.

The sale of goods falling within the scope of section 3 and sub-sections (1),

1. (3) and
2. (5) of section 5 of the Central Sales Tax Act, 1956 and clause
   • (zh) of section 2 of this Act shall be zero rated transactions as defined under clause
   • (zr) of section 2;

Where in the case of any goods tax is leviable in a series of sales or purchases, such series shall,ó

1. (a) in the case of goods imported into the Union Territory either from outside the territory of India or from any other State in India, be deemed to commence at the stage of the sale or purchase effected immediately after the import of such goods;
2. (b) in the case of goods exported out of the Union Territory to any place outside the territory of India or to any other State in India, be deemed to conclude at the stage of sale or purchase effected immediately before the export of such goods: Provided that in the case of goods exported out of the Union Territory to any place outside the territory of India, where the sale or purchase effected immediately before export of such goods is, under sub-section

1. (3) of section 5 of the Central Sales Tax Act, 1956, a sale or purchase in course of export, the series of sales or purchases of such goods shall be deemed to conclude at the stage of the sale or purchase immediately preceding such sale or purchase in the course of export.

1. (1) The burden of proving that any dealer or any of his transactions is not liable to tax under this Act shall lie on such dealer.
2. (2) For the purpose of claim of input tax credit, the burden of proving such claim shall lie on such dealer.