After the introduction of the Goods and Services Tax (GST) regime in India, there has been a lot of confusion and uncertainty among small and medium businesses regarding their eligibility to claim Input Tax Credit (ITC) of Value Added Tax (VAT).
The question that arises is whether an unregistered person can claim ITC of VAT by registering under GST, especially in cases where proof of payment of VAT is not available.
Before we delve into the specifics of the issue at hand, let's first understand what GST and VAT mean.
GST is a comprehensive indirect tax that has replaced various indirect taxes, such as excise duty, service tax and VAT, among others. VAT, on the other hand, is a tax levied on the value added to goods at each stage of production and distribution.
Under the VAT regime, businesses were required to register with the respective State VAT department and obtain a VAT registration certificate. They were also required to file regular returns and maintain proper records of sales, purchases and tax payments.
Under the GST regime, businesses with an annual turnover of up to Rs. 40 lakhs (Rs. 20 lakhs for some special category States) are exempted from registration. Businesses with a turnover of more than Rs. 40 lakhs are required to register and obtain a GST registration certificate.
Now, let's come back to the main question - can an unregistered person claim ITC of VAT by registering under GST?
The answer is yes, an unregistered person can claim ITC of VAT by registering under GST. However, there are some conditions that need to be fulfilled.
Firstly, the person should not have been liable to register under the VAT regime. This means that if the person was required to register under VAT but failed to do so, they cannot claim ITC of VAT by registering under GST.
Secondly, the person should have proof of payment of VAT. This is because ITC can only be claimed on the basis of tax paid. If the person cannot provide proof of payment of VAT, they will not be eligible to claim ITC of VAT under GST.
In cases where proof of payment of VAT is not available, the person cannot claim ITC of VAT under GST. This means that if the person has lost the VAT payment receipts or has not maintained proper records of VAT payments, they will not be eligible to claim ITC of VAT under GST.
It is important for businesses to maintain proper records of all tax payments, including VAT, under the GST regime. This will help them claim ITC of VAT and avoid any disputes or penalties in the future.
The GST regime has brought about significant changes in the taxation system of India. Businesses need to understand the implications of these changes and comply with the relevant laws and regulations to avoid any penalties or disputes.
In conclusion, an unregistered person can claim ITC of VAT by registering under GST, provided they were not liable to register under the VAT regime and have proof of payment of VAT. However, if proof of payment of VAT is not available, the person will not be eligible to claim ITC of VAT under GST.
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