Section 4 of Bihar VAT : Section 4: Levy Of Purchase Tax

Explanation using Example

Imagine a manufacturer in Bihar, ABC Manufacturing Ltd., who is registered under the Bihar Value Added Tax Act, 2005. ABC Manufacturing Ltd. purchases raw materials like steel and plastic which are not subject to VAT because they are either exempt or the purchase is from a dealer who is not liable to charge VAT. Now, ABC Manufacturing Ltd. uses these materials to create machinery. Since the raw materials were not taxed at the time of purchase and are not being sold but used in manufacturing, under Section 4 of the Bihar VAT Act, ABC Manufacturing Ltd. would be required to pay VAT on the purchase price of the steel and plastic at the same rate as if they were selling the finished machinery in Bihar. This ensures that tax revenue is collected on materials that are consumed within the state, even if they are not directly sold.