Office of the Commissioner of Commercial Taxes, Andhra Pradesh, Hyderabad. CCTs Ref. No.

AIII (1)/114/2011 Dated -11-2012

Sri Suresh Chanda, I.A.S., Commissioner of Commercial Taxes, A.P., Hyd. *** Sub: VAT on Textile Composition Scheme for payment of tax introduced Collection of VAT Certain guidelines issued Reg. Ref: A.P. Ordinance No. 9 of 2012. ***

In the reference cited (copy enclosed), Ordinance was issued with effect from 01-04-2012, introducing new sub Section (12) in Section 4 of the APVAT Act, which provides for payment of VAT by way of composition on sale of Textiles at the rate of 5% on 20% of the total turnover. The said provision envisages an option for the dealers to pay tax at the net rate of 1% without availing input tax credit instead of paying the tax @ 5% by availing input tax credit thereon. It means that (i) those, who do not opt to pay VAT by way of composition, may continue to pay tax @ 5% by simultaneously availing the benefits of the statutory provisions relating to input tax credit and (ii) those, who opt to pay tax by way of composition under the new sub Section (12) of Section (4) of the APVAT Act, may pay VAT at the net rate of 1% on the total turnover of sales of Textiles without availing the benefit of the statutory provisions relating to input tax credit. In the light of the provisions of the Ordinance, vide reference cited, all the Deputy Commissioners (CT) in the State are directed to initiate action to collect the VAT on the sales of Textiles with effect from 01.04.2012. enforced: 1. Payment of VAT @5% on 20% of sales turnover of Textiles without the benefit of input tax credit is an option to the dealers. If any dealer wants to pay VAT @ 5%, availing input tax credit as per the provisions of the APVAT Act, they can continue to pay as such. The dealers, opting to pay VAT by way of composition, need not file option form separately. Filing of return with details of turnover in accordance with the scheme to report such turnover, as detailed hereinafter, is enough and shall be deemed The following guidelines may be kept in view, while the collection of VAT on Textiles is

that the option for composition is exercised for the relevant month in terms of sub-section (12) of Section 4 of the APVAT Act. 2. It shall be ensured that all the dealers, engaged in the sale of Textiles and are not registered under the Act so far, get themselves registered at the earliest. Helpdesks, if necessary, may be opened for the said purpose. While issuing RCs, the following points may be considered: (a) (b) For dealers, having turnover upto Rs. 7.50 lakhs during the last 12 months there is no need for Registration. Dealers, having turnover between Rs. 7.50 lakhs and Rs. 50 lakhs during the last 12 months, or an estimated turnover between Rs. 7.50 lakhs and Rs. 50 lakhs for the next 12 months can be registered as TOT dealers. (c) Dealers, having turnover above Rs. 50 lakhs during the last 12 months, or an estimated turnover above Rs. 50 lakhs for the next 12 months shall be registered as VAT dealers. 3. Dealers, already having RC: (a) The cases, where the dealers have already reported the turnover and paid VAT @ 5%, duly availing input tax credit, such cases shall not be reopened. (b) In cases, where the dealers have already reported the turnover under 5% category and shown VAT due after availing admissible ITC, but have not paid VAT, due, action shall be taken to recover VAT due as per the Returns. Composition scheme of payment of tax @1% without the benefit of ITC is not applicable to such dealers. (c) If the dealers have already filed returns, reporting the turnover and paying the tax at the net rate of 1% due thereon, such returns may be accepted.

(d)

In cases, where the dealers reported nil turnovers or partial turnovers under 5% category for the tax periods from April 2012 to October 2012 and did not pay VAT due thereon for one reason or the other, but now opts to pay tax at the net rate of 1% for the unreported turnover, they shall be allowed to report the unreported

turnover in the return to be filed on or before 20-11-2012 and pay tax due thereon along with such return. Example: Say the unreported total purchase turnover for the tax periods from April 2012 to September 2012 is Rs. 20 lakhs and the total purchase turnover for the tax period of October 2012 is Rs. 80 lakhs. Both these purchase turnovers have to be added and the resultant purchase turnover i.e., Rs. 100 lakhs has to be reduced to one-fifth (1/5th) i.e., to Rs. 20 lakhs. Such reduced purchase turnover i.e., Rs. 20 lakhs has to be shown in the column for Non-creditable purchases (Box 6A). Similarly, say, the unreported total sale turnover for the tax periods from April 2012 to September 2012 is Rs. 25 lakhs and the total sale turnover for the tax period of October 2012 is Rs. 90 lakhs. Both these sale turnovers have to be added and the resultant sale turnover i.e., Rs. 115 lakhs has to be reduced to one-fifth (1/5 th) i.e., to Rs. 23 lakhs. Such reduced sale turnover i.e., Rs. 23 lakhs has to be shown in the column for 5% rate sales (Box 16A).

4. Dealers, not registered so far and willing to opt for co0mposition scheme: (a) The dealers shall take registration under the APVAT Act

immediately. (b) They shall file return for the tax periods from April 2012 to October 2012 on or before 20-11-2012 by showing 20% of the total purchase turnover for such period in the column for Non-creditable purchases (Box 6A)and 20% of the sales turnover for such period in the column for 5% rate sales (Box 16A). Such method of reporting turnover ensures zero value for the input tax credit. The above return shall be filed on or before 20-11-2012 and pay tax due thereon along with such return. 5. The word, Textiles, used above, means Cotton fabrics, manmade fabrics, woolen fabrics, textile made ups, bed sheets, pillow covers, towels, blankets, travelling rugs, curtains and embroidery articles.

6. Guidelines with regard to tax liability for the tax periods prior to March 2012 will be issued separately and no action shall be initiated at present in relation thereto. 7. These guidelines will be in force till further orders.

Encl: as above. Commissioner of Commercial Taxes To All the Deputy Commissioners in the State through email.