Solution for Edition No.62.

What is Purchase TAX

• A transaction of sale may not atrract the purchase  tax. To illustrate :-
• a sale by an unregistered dealer;
• or a sale by an agriculturist.
• In such cases, State Government may levy tax in the hands of purchaser (if a registered dealer) known as Purchase Tax. Purchase Tax may also be levied on certain specific purchases or for non fulfillment of prescribed conditions relating to purchase effected. 
• The Purchase Tax is usually levied at first point of Purchase. 
• The classification of goods and rate of tax, by and large, are the same as applicable to a sale of goods. In addition, there may be a specific list of commodities liable to Purchase Tax.
• It is levied on Purchase Price. 
• On resale of such goods in the same form there may or may not be any Sales Tax. 
• The law may permit a set-off of tax paid on purchases. 
• The provisions of the relevant law need to be examined for the liability, its quantification, set-off, liability to additional levies and so on.