Restricted credit if output goods are trf. to another state

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

01 May 2011 If the final products are transferred to another state as stock transfer or branch transfer, input credit will have TO BE REVERSED on PRO-RATA basis,which is in excess of 2%.In other words, in caseof goods sent on stock transfer/branch transfer out of state, 2% tax on inputs will become payable e.g.if tax paid on inputs is 12.5%,credit of 10.5% is available.
when CST is reduced to NIL, full credit of tax paid on inputs will be available i.e. inter state sales and stock transfers will be 'ZERO RATED' and 'not 'EXEMPT'.

I AM CONFUSE ABOUT THE LINE WRITTEN:-
"input credit will have TO BE REVERSED on PRO-RATA basis,which is in excess of 2%."
and again line written as :-
"In other words, in caseof goods sent on stock transfer/branch transfer out of state, 2% tax on inputs will become payable e.g.if tax paid on inputs is 12.5%,credit of 10.5% is available."

please any one can explain me??????

thanks in advance........
i am following V S DATEY (ca-final)
page no:814 26th edition..........

CA Vijay Kumar Gupta

CA Vijay Kumar Gupta (Expert)
Follow

03 May 2011 please mention in which state.

Querist : Anonymous

Querist : Anonymous (Querist)

03 May 2011 respected sir, it is an example that if tax paid on inputs is 12.5%,credit of 10.5% is available..........
there is no mention of any specific state.........

Upgrade to CAclubindia Pro. Subscribe Now!

CA Vijay Kumar Gupta

CA Vijay Kumar Gupta (Expert)
Follow

04 May 2011 yes, earlier it was promised by union govt. to reduce CST to nIl gradually. but not happenedin reality. In most of the states,input vat reversal to be made at the rate of 2% at present. No one comment what will happen in future. GST is coming .