(1) In calculating the net tax payable by a dealer for a return period there shall be deducted from the tax payable for the return period , a sum equal to, -

(a) the tax paid under sub-section (2) of section 6; and

(b) tax paid under section 3 of the Tax on Entry of Goods into Local Areas Act, 1994 15 of 1994) on the import of any goods, other than those included in the fourth schedule;

where such goods are intended for resale or for use in the manufacture of taxable goods or for use in the execution of works contract or for use as containers or packing materials for the packing of taxable goods in the state:

Provided that where the special rebate is in respect of capital goods, the same shall be allowed over a period of three years and all the conditions and restrictions applicable to input tax credit under sub-section (2) of section 11 shall apply to the special rebate under this section also:

Provided also that where the goods except rubber latex, rubber wood, plywood, packing cases and veneers in respect of which tax is payable under sub-section (2) of section 6 is sold in the state or in the course of interstate trade or used in the course of manufacture of taxable goods in the month in which it is purchased, the special rebate allowable in respect of such goods resold or sold in the course of interstate trade or used in the manufacture of goods liable to pay tax under this Act or Central Sales Tax Act, 1957 may be availed in the month itself

Provided also that where the goods in respect of which tax under subsection (2) of section 6 or under section 3 of the Kerala Tax on Entry of Goods into Local Areas Act, 1994 has been paid, are sent outside the State or used in the manufacture of goods and the same are sent outside the State, otherwise than by way of sale in the course of inter-state trade or export or where the sale in the course of inter-state trade is exempted from tax, the special rebate under this section shall be limited to the amount of such tax paid in excess of five percent :

Provided also that where the goods in respect of which tax under subsection (2) of section 6 or under section 3 of the Kerala Tax on Entry of Goods in to Local Areas Act, 1994 has been paid and where such goods are resold in the State at reduced rate or a part of which has been resold and the balance disposed in the state otherwise than by way of sale or used in the manufacture of taxable goods, then the special rebate under this section shall not exceed the output tax payable in respect of such goods or goods manufactured out of such goods.

(2) unregistered dealers or dealer paying presumptive tax under sub-section (5) of section 6 or dealer paying compounded tax under section 8 shall not be eligible for rebate under sub-section (1).

Provided that notwithstanding anything contained in this Act, a manufacturer of medicines who have opted for payment of compounded tax under clause (e) of section 8 shall be eligible for special rebate of the tax paid under sub-section (2) of section 6 of this Act on the purchase of raw materials with effect on and from the 1st day of April, 2005.

(3) If the rebate allowed under sub-section (1) and the input tax credit allowed under section 11 is more than the output tax for that return period, the amount by which the sum of the input tax credit and rebate under sub-section (1) is in excess of the output tax for the return period shall be carried forward to the next return period and treated in the same manner as input tax under sub-section (6) of section 11, as if such rebate were also input tax credit accrued under that section.

(4) Where rebate is claimed under sub-section (1) in respect of any goods during a return period and the goods are subsequently used, fully or partly for purposes other than those specified in the said sub-section, or has remained as unsold at the time of closure of business, in relation to such goods, the rebate claimed on such goods used otherwise or remained as unsold at the time of closure shall be the reverse tax for that return period which may be determined in the same manner as if it were a reverse tax accrued under sub-section (7) of section 11.