Input Tax Credit - VAT

VAT paid on Purchase/Import can be set off against VAT to be paid on Sales. Other following important points to consider:
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CasesInput Tax Credit
Goods that can be used for personal purposes or for business purposes.No deduction or only a partial deduction
Used for both taxable and non-taxable transactionCredit allowed only for goods used in taxable supply
Capital GoodsCredit Allowed. For automobiles only 40% is allowed. 'automobiles' means any motor vehicle with three or more wheels used on a road for carriage of passengers.
VAT paid on RCM on import of servicesCredit Allowed
VAT paid on RCM on construction from unregistered supplierNo ITC allowed
Goods lost due to theft, fire, accident, wear, tear, riot or expiredITC allowed- Application with evidence has to be filed within 30 days. can claim credit to the extent of insurance claim received against insured goods(No need to apply)
Conditions for Claiming Tax Credit:
1. goods or services in respect of which tax deduction has been claimed are directly related with taxable business
2. if internally purchased, Tax invoice as per Rule 17 has been obtained.
3. If imported, documents related to import proving payment of tax should be obtained.
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ITC for carrying out both taxable and non-taxable supply :
The person shall establish relation of the purchases/imported goods with taxable and non-taxable supply. If he fails to do so, such taxpayer may claim ITC in proportion to the taxable supply in relation to total supply. for practical purposes, in such cases full ITC is claimed, while filing return for Ashar, the proportion of taxable sales for the year is worked out and ITC is adjusted accordingly.
ITC not allowed in following cases
Beverages (Water is not a beverage)
Entertainment expenditures
only 40% on automobiles
Petrol
Alcohol or alcoholic beverages
ITC of an invoice, 1 year before the date of claim for tax deduction is not allowed.
If a person carries the above business as their principal business, then ITC is allowed. VAT credit on Diesel, Petrol (Other than used in Vehicle) and LP gas consumed for production of taxable goods can now be availed.
Refund of ITC:
1. If ITC remains unadjusted for a continuous period of 4 months, make an application to the tax officer for refund in lumpsum.
2. In case of a registered person exporting more than 40% of total sale in a month, make an application to tax officer in prescribed format for refund of ITC of that month.
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For Used Goods
Tax Assessment of the used goods shall be done only on the balance between the selling price and the purchase price (includes tax paid at the time of purchase) of such goods. The seller of such goods shall maintain the permanent record as prescribed at the very time of the purchase or sale of such goods. No ITC is allowed on such goods.

Cases	Input Tax Credit
Goods that can be used for personal purposes or for business purposes.	No deduction or only a partial deduction
Used for both taxable and non-taxable transaction	Credit allowed only for goods used in taxable supply
Capital Goods	Credit Allowed. For automobiles only 40% is allowed. 'automobiles' means any motor vehicle with three or more wheels used on a road for carriage of passengers.
VAT paid on RCM on import of services	Credit Allowed
VAT paid on RCM on construction from unregistered supplier	No ITC allowed
Goods lost due to theft, fire, accident, wear, tear, riot or expired	ITC allowed- Application with evidence has to be filed within 30 days. can claim credit to the extent of insurance claim received against insured goods(No need to apply)