Tuesday, 6 May 2014

Reorganisation of Andhra Pradesh w.e.f. 2 June 2014 – Key implications from AP Value Added Tax, AP Entry Tax and Central Sales Tax Law perspective

The Andhra Pradesh Reorganisation Act, 2014 (‘the Act ) proposes to create Telangana as the 29th State of the Union of India. Hyderabad is proposed to be the common capital of the residual Andhra Pradesh (‘AP’) and the new State of Telangana for a period of 10 years.

This tax alert seeks to provide key highlights of the recently issued Frequently Asked Questions by the APVAT authorities providing the views of the department on various aspects under the AP Value Added Tax (APVAT) /AP Entry tax (APET) and Central Sales tax (CST) laws.

Online option for new TIN is coming to a close on 7 May 2014.

There are viewpoints which are issued whose legal validity needs to be tested. For example, it is said that any ITC pertaining to sales prior to 2 June 2014 with invoices carrying old TIN number shall not be eligible for ITC in the new State. It is also mentioned that these are to be addressed with business solutions than legal solutions.

With AP Reorganisation Act, 2014 merely providing for framework, how much of some of these directives issued in the form of FAQ is compatible with the existing law of APVAT, etc needs to be seen.

Lot more practical clarifications are expected having significant impact on the businesses. For example, should businesses in AP ensure all intra state procurement to be complete in all respects before 2 June 2014 so that there is no loss of ITC or postpone some of its purchases post 2 June 2014?

The direct impact of the current intra-state procurement and sales with a creditable VAT to a non-creditable CST and the current intra state stock transfer becoming interstate stock transfers with credit burnout needs the close attention of the business.

The countdown has started and businesses are discovering areas which could have significant impact requiring proper planning. Coming days require a closer watch to avoid pitfalls.

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