As a registered person under the Sales Tax Act, 1990, claiming input tax credits can be a valuable way to reduce your tax burden. However, there are several restrictions in place to ensure fair and efficient tax collection. This article delves into the key points of the Act, which outlines what input tax credits you cannot claim.
General Restrictions:
- Non-Taxable Use: Input tax cannot be claimed on goods or services used for personal consumption, non-business activities, or purposes unrelated to taxable supplies you make. This includes items like vehicles, appliances, and furniture for personal use.
- Undocumented Transactions: You cannot claim input tax on purchases where the supplier hasn’t deposited sales tax, has discrepancies in their Sales Ledger data, or uses fake invoices.
- Non-Compliance: If you fail to provide information required by the Board, you lose the right to claim input tax on those purchases.
- Certain Goods and Services: Input tax is not allowed on specific goods like building materials, pre-fabricated buildings (except for sale or re-sale), and certain agricultural machinery.
- Unregistered Distributors: You cannot claim input tax on goods sold to unregistered distributors where the sale invoice doesn’t have the recipient’s valid identification number.
Proportional Claiming:
If you deal in both taxable and non-taxable supplies, you can only claim a portion of input tax proportional to your taxable activities, as determined by the Board.
Exceptions for Registered Persons:
- Input tax on goods acquired for sale or re-sale, or directly used in producing taxable goods, is generally claimable.
- Electronic cash registers are an exception to the restriction on office equipment.
Additional Points:
- The Board has the authority to notify additional restrictions on specific goods or services.
- The Act prohibits claiming input tax credit for those who paid fixed tax under its previous provisions.
- The Board can restrict the supply of certain goods to unregistered persons.
By understanding these restrictions and seeking professional advice when needed, you can ensure you comply with the law and maximize your eligible input tax credit claims.
