In Brief
The State of Punjab introduced Rule 21(8) of the Punjab VAT Rules on 25.01.2014, reducing input tax credit on stock in trade when the tax rate on iron and steel goods fell from 4.5% to 2.5%. The rule was to take effect from 01.02.2014. However, the enabling statutory amendment to Section 13(1) of the Punjab VAT Act came into force only on 01.04.2014. The Supreme Court upheld the High Court's decision that Rule 21(8) could not apply to input tax credit already earned at the higher rate prior to 01.04.2014. A taxable person acquires a vested right to input tax credit on the date of purchase. Reducing that right requires express statutory authorization. Since no such authorization existed until 01.04.2014, the rule applies only to transactions after that date, not retrospectively to goods already purchased and in stock.",
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