2026-VIL-125-AP
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VAT High Court Cases

Andhra Pradesh VAT Act, 2005 - Input Tax Credit on goods sold in the same form at subsidized rates - Petitioner, a State Government undertaking, procures and supplies essential commodities at subsidized rates fixed by the Government. It claims Input Tax Credit on the purchase of these goods which it then sells in the same form through the public distribution system - Whether the petitioner is entitled to claim full Input Tax Credit on the purchase of the commodities when the goods are sold in the same form at subsidized rates fixed by the Government – HELD - The petitioner is entitled to claim full Input Tax Credit on the purchase of the commodities as per Rule 20(4)(a) of the AP VAT Rules, 2005, which allows a dealer who buys and sells goods in the same form to claim full Input Tax Credit. The fact that the goods are sold at subsidized rates fixed by the government does not disentitle the petitioner from claiming the full Input Tax Credit. The respondents' disallowance of the Input Tax Credit claimed by the petitioner on the ground that the sale price was less than the purchase price is not sustainable - the order under challenge is set aside and the writ petition is allowed - Purchase Tax on By-Products - The respondents levied purchase tax under Section 4(4) of the AP VAT Act on the by-products (broken rice, bran, and husk) which are left with the millers as per the terms of the agreement between the petitioner and the millers, on the ground that these by-products are consideration for the conversion of paddy into rice - Whether the by-products left with the millers can be treated as "disposed of" by the petitioner and therefore subject to purchase tax under Section 4(4) of the APVAT Act – HELD - The by-products like broken rice, bran, and husk are left with the millers as per the terms of the agreement and there is no transfer of title or "disposal" of these goods by the petitioner. Therefore, the levy of purchase tax under Section 4(4) on these by-products is not sustainable. The responsibility to pay tax on these by-products lies with the millers as per the agreement. This issue is no longer res integra, as the High Court has previously held in a similar case that the value of by-products left with the millers cannot be added to the turnover of the petitioner for the purpose of tax computation.
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