Sales Tax Refund

[Star]

Dear All,

A Company pays sales tax to the suppliers and collects sales tax from its customers.

There is a case that the company made some purchases on which sales tax was paid by the Company. After this the operation of the company closed and purchased supplies could not be used in production process and spoiled.

Please answer if a company is a non-going concern, whether in above case sales tax would be refundable???? Please answer with reference (if possible).



Regards,

*

[faisal_desperado]

Dear Star,

I just have gone through your email, the query raised by you is quite appreciable, after going through your query, I am bound to reply for the same.

With regard to your query, please note that there exists a contradiction in between two statements used for the purpose of resolving the issue you raised, in case of such dual statements, case is referred to in favour of tax payer rather than payee. Please go through the sub section 1a of section 8 of Chapter-II i.e. SCOPE AND PAYMENT OF TAX, which states that, “Notwithstanding anything contained in this Act, a registered person shall not be entitled to reclaim or deduct input tax paid on the goods or services used or to be used for any purpose other than for taxable supplies made or to be made by him”.

In the light of the aforementioned, you may not claim the refund of input tax in the situation you specified, since the goods have been destroyed / spoiled i.e. goods have been used for the purpose other than making taxable supplies.

However, rules regarding “Refund of input tax” states that “If the input tax paid by a registered person on taxable purchases made during a tax period exceeds the output tax on account of zero rated local supplies or export made during that tax period, the excess amount of input tax shall be refunded to the registered person not later than forty-five days of filing of refund claim in such manner and subject to such conditions as specified, that is to say, <b>you need to file refund claim, so that you will be refunded as per rules.</b>

Furthermore, If a business is discontinued then such person is required to apply for de-registration however he will be required to file a return, to be called as final return, before which de-registration will not be proceeded. The said return is to be filed to the Collector in the specified form in such manner and at such time as directed by the Collector. While filing the final return, you need to mention that you are eligible to have a refund on account of input tax notwithstanding the fact that goods have been spoiled etc.
In my opinion, you may claim refund of input tax on the basis of the above mentioned last two Para.

Let me know if confusion still exists.

Best Regards,