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)


Exam Questions

Question 2

Briefly explain whether following purchases are eligible for availing input tax credit :

  1. 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.
  2. Jain & Co. purchased goods from Tide Enterprises. Tide Enterprises is an unregistered
  3. Ankit purchased some capital goods. The final product manufactured by Ankit using
    these capital goods is exported.
  4. Mohan purchased goods for being used in execution of a works contract.
  5. Singla & Co. purchased goods from Malhotra Enterprises, a registered dealer. Malhotra
    Enterprises has opted for composition scheme under the provisions of respective State
    VAT Act.
  6. Sahil purchased goods from Ganesh. Ganesh has not shown VAT charged on the
    purchase value, separately in the invoice.
View Answer

Learn in your speed, with individual attention - Teachoo Maths 1-on-1 Class

Ask a doubt
CA Maninder Singh's photo - Co-founder, Teachoo

Made by

CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 13 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.