Taxation of yarn and building material has been changed by Excise and Taxation department by
introducing Notifiations dated 31-03-2016 wef 01-04-2016. In this write up an attempt has been made to
analyse the law with this advent of
Excise and Taxation department.
1. Taxation
of Yarn
At present Yarn of all types including yarn waste and sewing
thread except cotton yarn is taxable @ 6.05% under Entry No. 134 of Schedule B
of Punjab Vat Act. Raw Wool and its waste is tax free under Entry 42 of
Schedule A. Cotton Waste is taxable @
6.05% as per Entry 27 of Schedule B. Fibre of all types and fibre waste is
taxable @ 6.05% as per Entry 39 of Schedue B.
Knitting wool is also taxable @
6.05% as per Entry No. 64 of Schedule B.
Also, as u/s 6(7) of Punjab Vat Act there is advance tax on yarn as per
Notification dated 04-10-13, on the import of yarn into the into the state of
Punjab as under:
Entry No.4
|
All other types of yarn (excluding raw cotton,
ginned cotton, shoddy and worsted yarn), partially oriented yarn, fibre, polyester
top, polyester chips including waste
|
5.5%
|
Entry No.10
|
Cotton Yarn
|
4.5%
|
However
vide Notification dated 31-03-2016, effective from 01-04-2016, yarn shall be
taxed as under:
a)
All types of yarn (including cotton yarn )their
waste and sewing thread shall be taxable @ 3.63% [3.3% +10%]
b)
100% Polyester filament yarn, polyester top,
polyester chips, polyester staple fibre and its waste, acrylic fibre shall be
taxable @ 6.05%[5.5% +10%]
Further advance tax rates have
been changed as under
wef 01-04-2016:
All
types of yarn (including cotton yarn )their waste and sewing thread
|
3.3%
|
100%
Polyester filament yarn, polyester top, polyester chips, polyester staple
fibre and its waste, acrylic fibre
|
5.5%
|
Comments:
1.
Rate of tax on all types of yarn including cotton
yarn, sewing thread, wollen yarn etc. gets reduced from 6.05% to 3.63%.
2.
Earlier in the day on 01-04-2016, 100% polyester
yarn was brought to advance tax under 5.5%. However, in later spate of
notifications, it was replaced by “100% polyester filament yarn”. Thus 100%
polyester yarn shall get covered by 3.3% tax rate only. Partially oriented Yarn
i.e. POY shall also get covered by 3.3% tax rate.
3.
Sewing Thread is cotton yarn and hence declared
goods as per Madras High Court In RV Krishaniah [92 STC 262]. Hence sewing
thread can not be charged to maximum tax @ 5%.
4.
Following items were earlier excluded from
advance tax
a)
Raw Cotton
b)
Ginned Cotton
c)
Shoddy Yarn
d)
Worsted Yarn
However these items have not
been excluded in Notification
dated 31-03-2016.
Raw Cotton and Ginned Cotton is not yarn and gets
covered by fibre presently taxable @ 6.05% as per Entry 39
of Schedule B but at the same time cotton is decalred goods and maximum rate
can be 5% only. Hence omission to exclude raw cotton and ginned cotton shall
not affect the advance tax regime on these items. However Shoddy yarn is used
to manufacture blankets which is tax free under entry 59 of Schedule A. At the
same time worsted yarn is used to manufacture shawl and shawl being textile
fabric gets covered by Entry 52 of Schedule B and is also tax free. Earlier
since shoddy yarn and worsted yarn were outside the purview of advance tax and
blankets and shawls were also tax free, the manufacturers were not required to
get themselves registered under Punjab vat law. However, by omission of
exclusion of shoddy and worsted yarn, the shawl and blanket manufacturers of
Punjab shall either pay advance tax on entry of shoddy and worsted yarn or
shall have to obtain registration and apply for advance tax exemption like
Knitting Industry.
5.
Taxation of Building Material
At present
a)
Bricks of all kinds including fly ash bricks,
refractory bricks and ashhaltic roofing earthern tile are taxable @ 6.05% under
entry no. 13 of ScheduleB.
b)
Lime. Lime stone, clinker and dolomite is
taxable @ 6.05% as per Entry No. 68 of Scheule B
c)
River Sand is taxable @ 6.05% as per Entry 97 of
ScheuleB .
d)
Stone Bajri, Crusher Sand and Stone Dust is
taxable @ 6.05% as per Entry 145 of SCheduleB.
e)
Timber and Scaffolding is taxable @ 6.05% as per
Entry 170 & 171 of Schedule B.
f)
Iron and Steel goods are taxable @ 3.85% as per
Entry 21 of Schedule E.
g)
Cement is taxable @ 14.30% being covered by
Schedule F.
However vide notification dated
31-03-2016
effective
from 01-04-2016, stone bajri has been excluded from Entry 145. Further Vide
Entry 30 of Scheudule E, stone bajri and sand when carried in tractor
trolley has been taxed @ Rs. 4000 per trip; when carried in truck having
capacity of 9 Metric ton has been taxed @ Rs. 7000/- per trip; For being
carried in bigger vehicle rate is Rs. 10000/- per trip.
Comments:
1. The word
“Trip” has not been defined in Punjab Vat Act. Trip means a journey in which
one goes somewhere and comes back again. Say a truck of crusher from Pathankot
travel to Jammu, offloads the crusher there and then comes back again laden
with crusher from Jammu to Pathankot. Hence it should be defined as to whether
return journey is separate trip or not.
2. Crusher
Sand still remains covered by Entry 145 and River Sand still stands covered by
Entry No. 97 of Schedule B. But at the same time sand has been covered by
special trip wise taxation under Schedule E. This shall lead to confusion and
needs immediate clarification.
3. In case
of Inter state purchase, there shall be no tax, hence buyers may prefer to
purchase stone bajri and crusher from outside the state because of hefty
taxation imposed per trip. The dealers and buyers in Punjab might suffer
heavily due to this taxation.
4. Further
the tax has been imposed wef 01-04-16 without providing any time to ponder over
and spread any message about this taxation.
Conclusion: The issues raised in this
article reveal that nuts and bolts of new notifications are required to screwed
up before their implementation is set in motion. The better wisdom is not to
issue the important notifications which impact the masses at eleventh hour of
their implementation so that at least foreseeable glitches may be removed.
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