Input tax credit in relation to any period means Balance left after setting off the amount of input tax by a registered dealer against the amount of his output tax.
Important Points regarding Input Tax
No Input of CST purchases
VAT on Inputs
VAT on Inputs is available to both manufacturers and traders
Both buyer and seller shall be registered, only then input will be available.
If seller has not paid the tax on goods, input not available to seller
Input is available as soon as goods are purchased, it doesnot matter when goods are sold
If goods partially used for exempted and partially for taxable goods, then proportionate Input available.
In case goods purchased within state and transferred outside state, then whole Input less 2% to be reversed
In case of export, refund of input is allowed.
Input tax on capital goods
Capital goods include plant and machinery, furniture, fixture, electrical installations, vehicles etc
Input is available only if capital goods are directly used for manufacturing or sale
In case used in office, no input
Also in VAT Acts, there is negative list of items on which Input not available
In some states, Whole Vat Input is available in first year itself
However, in some other states, Vat Input is available in installments (For example In Delhi, vat input of capital goods is available in 3 years 1/3 every year)
Briefly explain whether following purchases are eligible for availing input tax credit :
- Rohan purchased goods from a registered dealer. He claims to have paid VAT on the
said goods but the invoice pertaining to said purchase has been lost on account of
negligence of a clerk in his office.
- Jain & Co. purchased goods from Tide Enterprises. Tide Enterprises is an unregistered
- Ankit purchased some capital goods. The final product manufactured by Ankit using
these capital goods is exported.
- Mohan purchased goods for being used in execution of a works contract.
- Singla & Co. purchased goods from Malhotra Enterprises, a registered dealer. Malhotra
Enterprises has opted for composition scheme under the provisions of respective State
- Sahil purchased goods from Ganesh. Ganesh has not shown VAT charged on the
purchase value, separately in the invoice.
- Input tax credit cannot be claimed on purchase made by Rohan as the purchase invoice
is not available with him.
- Purchases made by Jain & Co. from Tide Enterprises are not eligible for input tax credit
as Tide Enterprises is not a registered dealer.
- Capital goods used for manufacturing/packing goods to be sold in the course of export
out of the territory of India are eligible for claiming input tax credit. Thus, Ankit can claim
input tax credit on capital goods purchased by him.
- Mohan can claim input tax credit as purchase of goods for being used in execution of a
works contract are eligible for input tax credit.
- Purchases made by Singla & Co. from Malhotra Enterprises are not eligible for input tax
credit as purchases from registered dealer who opts for composition scheme under the
provisions of respective State VAT Act are not eligible for Input Tax Credit.
- Purchases made by Sahil are not eligible for input tax credit as the invoice issued by Ganesh
does not show VAT charged on the purchase value separately in the invoice.