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Input Tax Credit

(Guest)

Hi.

Is it Possible to avail input credit in their Purchases since their Selling goods are exempted? But having VAT Liablity in their Scrap Sales. If Yes, can set off against VAT Liability in Scrap sales.

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4 Replies

Vibhash Kumar Sah (CA) (73 Points)
Replied 08 July 2009

If output tax is exempted no input credit can be taken

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(Guest)

Can u clear with Provisions pls

RAJU (LEARNER) (1089 Points)
Replied 09 July 2009

Hi Sindhu,

If sale is liable for output tax, credit can be availed. However, this is a situation wherein at the time of purchase there is no output tax liability but arises subsequently on generation of scrap. Accordingly in the month of purchase entire input tax would have been shown as ineligible.

In the State of Karnataka Section 17 read-with Rule 131 and 132 provides for apportionment of input tax credit between taxable and non-taxable goods. In view of this, input tax can be availed in proportion to taxable and non-taxable goods.

But I believe that the provisions does not cover the specific situation envisaged by you. I agree that there are practical problems is applying these provisions.