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VAT applicability on Organic fertilizer

(Querist) 23 June 2010 This query is : Resolved 
In India though VAT has been introduced still aged old Sales Tax Acts/Rules are followed by and large. The Sales Tax department have not geared up understand the rapid technological development. Still they say organic manure is only Farm Compost. But by industrial process by fermentation method they are not considering the item as Organic manure and terming it as Organic fertilizer and claiming 4% VAT from Manufacturers, who are helping Govt.of India, to some extent in reducing Chemical Fertilizers draining out foreign exchange. At the same time the Industries who manufacture Organic Manure through Industrial process (as per Tax authorities:Organic fertilizer) are not eligible for any subsidies from Central/State Government and only discouraging technological development in India with age old knowledge. At the same time Department of Biotechnology, Ministry of Agriculture, Ministry of Chemicals and Fertilizers are also not taking any action to solve the problem of frequent harassment from respective Local Sales Tax authorities demanding Sales Tax and threatening to levy penalty,interest. Is there any way.If we have to approach Tribunals and Courts the industrialists are
asked to deposit 25% or 50% before going for appeal. There is again confusion in advance ruling and appellate authorities also.Please suggest a solution.
s.subramanian (Expert) 30 October 2010
Yes. it is certainly a moot point of law for discussion.
R.Ramachandran (Expert) 30 October 2010
Dear Narayanarao,
From your letter itself I find that you yourself already know several solutions to your problem.
(1)That you have to make the Government of the day understand the difference if any between Organic Manure and Organic Fertiliser - you have to enlist the co-operation of the Professors in these areas and with their comments you must write to the governments.
(2) Since solution (1) would take longer time, you must approach the appellate authorities and through facts and literature you should prove that organiz manure is not the same as organic fertiliser. Yes, as per statutory requirement, you have to deposit the minimum prescribed percentage of tax demand and/or penalty, before your appeal could be heard. If you want judicial pronouncement, naturally you have no other option than to obey the provisions.
(3) Determination of question of classification (i.e. Advance Ruling) in VAT matters are not available where the matter is already pending before the departmental authorities and or appellate authorities.
THUS, YOU HAVE TO AVAIL ONE OF THE ABOVE OPTIONS. The choice is yours.


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