Punjab Pradesh Beopar Mandal demands withdrawal of amendment in Punjab VAT Act 2005 with regard to ITC

Writes to Punjab Excise and Taxation Commissioner Anurag Verma
Ludhiana/Amritsar, May 7, 2014: Punjab Pradesh Beopar Mandal has written to the Punjab Excise and Taxation Commissioner Anurag Verma regarding restriction of Input Tax Credit (ITC) to goods sold with effect from April 1, 2014.
The representation sent under the signatures of the Mandal’s state president Amrit Lal Jain, state general secretary Sunil Mehra, state secretary Mohinder Aggarwal and others reads as under:
“Vide Notification dated 15-11-2013, clause 5 amending the section 13(1) first proviso  of The Punjab VAT Act 2005 w.e.f. 01-04-2014, has pushed the traders and industrialists  further deep into debris of records.
Before amendment of section the dealers were entitled to Input Tax Credit on entire purchases for sale in the State or in the course of inter-State trade or commerce or in the course of export or for use in the manufacture, processing or packing of taxable goods for sale within the State or in the course of inter-State trade or commerce or in the course of export.
After amendmend the Input Tax shall not be available as input tax credit unless:
-    Goods are Sold within state or in the course of inter-State trade or commerce or in the course of export or
-    Are used in the manufacture, processing or packing of taxable goods for sale within the State or in the course of inter-State trade or commerce or in the course of export.
The above amendment shall have following implications:
1.    The dealers who pay their taxes shall have to compute their stock every and dealers who pay their taxes quarterly shall have to compute their stock every quarter to ascertain the quantum of stock on which Input tax Credit shall not be available.
2.    The small dealers shall also have to maintain accurate stock records for every incoming and outgoing material.
3.    The dealers shall always at the gun point of the department officials who will now love to visit the premises of dealers frequently and shall make stock taking their normal course of duty. This will malign and crush all the hopes of already enraged people of the Punjab.
4.    This shall also imply the denial the credit of taxes which has already reached the coffers of the government. The department has already amended section 13(12) to ensure that input tax credit is allowed only against tax actually paid into Government Treasury.
5.    This will result in elongation of credit utilization which will result in maintaining higher levels of working capital and thus increase the cost of maintaining such higher working capital directly resulting into erosion of profitability of dealers.
6.    To enforce such provisions, the department also shall have to recruit more field staff and thus cost of administration shall be more than benefits that can ne reaped.
It is further brought to your notice that Delhi Government had
also tried to make such attempt in the past which was later withdrawn by them w.e.f. 01-10-2011 just after one and half year after the effective date.  Similarly Haryana also withdrew such attempts. The Cenvat Credit Rules also do not envisage such restrictions on allowance of credit fully realizing that maintaining one to one co-relation between purchase and sale shall result in unnecessary burden on the assesses.
Further, the amendment made by the department lacks clarity also as under:
1.    Whether credit is allowable on Raw material which is used in the manufacturing of taxable goods for Sale i.e. finished goods should be clarified.
2.    Whether credit is allowable on material used in manufacturing capital goods ?
3.    Further whether any reversal of Input tax credit is required on stock as on 31-03-2014?
4.    Whether input tax on stock can be used for payment of interest and penalty?
The Punjab Pradesh Beopar Mandal therefore demands withdrawal of this amendmend with immediate effect. The Punjab Pradesh Beopar Mandal  feels  that  Department of Excise & Taxation in its spur to collect more and more taxes is resorting to means like imposition of annual processing fee, e-trip, advance tax on thirty items, first  stage taxation on 140 items which are resulting in squeezing the trade and industry and all suggestions and request have fallen flat on its ears. First-Stage Taxation on 140 items has almost stopped sale of goods to other states as No I.T.C will be available, if goods are purchased from the state dealer and hence hundreds of suppliers including Arhtiyas are virtually thrown out of their businesses. Vat rates are also increased for 13% to 14.5% and 5.5% to 6.25% plus additional 10 percent surcharge, Pendency in VAT refunds has touched the Himalayan figure of  more than 500 crores till Jan 2014, C-Forms are not available, No accountability for officials and last but not least Vat 15 is changed  at least every quarter . The department simply shuts its ears and eyes when we point out that there is a rampant corruption in the Excise & Taxation department. Traders are just slaves and leading miserable life. There is a no independent wing to file appeal, if dealer is not satisfied with the assessment of his case. Why not we have an independent tribunal with a retired High Court judge,  so that aggrieved assessees could get justice. Accountability must be fixed for officials of Excise & Taxation Department. Video surveillance teams should be deployed at ICC barriers, Enforcement wings of the department and at offices of excise & taxation to check corruption and high handedness and rude attitude of the officials. Even regarding corruption cases against the 31 officials of the Excise & Taxation department in the year 2007 by the Sh. Shiv Kumar S.P Vigilance,  state Govt. never initiated any action. High scandals of evasion of Vat taxes are only due to connivance between department officials & their self created bogus firms. Humanity and courtesies are aliens to the Excise & Taxation department Punjab with traders. Mandal feels that due to harsh and negative policies of the Excise & Taxation department regarding Vat policies, GDP growth declined from 7% in 2010-11 to 5.8% in 2011-12. As many as 18770 industrial units have closed down in the state. Punjab is passing through grim scenario in industrial sector. Traders expect respect, dignity and honour and they are always seen with suspicion and derogatory remarks are used against beoparis. It looks department is hardly bothered about our concerns and its entire emphasis is to come out every day with new rules, regulation and notification, which lack vision and clarity. Traders have simply become a clerks and left with no time to think about expansion and progress of trade & industry. It is not possible that whole of the budget of the state should be fulfilled from just about 2.38 laks vat registered dealers of the state.  If the traders and industrialist of the state have resources at their command they are prepared to call it a day and say good bye to state. I would like to quote the words of Mr. P. Chidambaram Finance Minister, Govt. Of India which he said at Shekhar Gupta’s (Chief editor of the Indian express) book launch “India has moved,”  “from a petitioner society to an aspirational one. Treating people as petitioners is a mistake. PPBM is presenting petition after petition but it is regretful that Department hardly ponders seriously that we are a bread earner of the govt.”