The set-off available under any rule shall be reduced and shall accordingly be disallowed in part or full in the event of any of the contigencies specified below and to the extent specified.

(1) If the claimant dealer has used any taxable goods as fuel, then an amount equal to three per cent of the corresponding purchase price shall be reduced from the amount of set-off otherwise available in respect of the said purchase.

(1A) On the purchases of natural gas to which sub-rule (1) does not apply, unless the natural gas purchased is resold or sold in the course of inter-State trade or commerce or in the course of export out of the territory of India or dispatched outside the State, to any place within India, not by reason of sale, to his own place of business or of his agent or where the claimant dealer is a commission agent, to the place of business of his principal, an amount equal to three per cent of the purchase price shall be reduced from the amount of set-off otherwise available in respect of the said purchases.

Explanation.- For the purpose of this sub-rule, "natural gas" will be deemed to have been sold or resold if the sale is after conversion from one form of natural gas to another form.

(2) (a) If the claimant dealer manufactures any tax free goods then an amount equal to the amount calculated at the rate notified from time to time, by the Central Government for the purposes of sub-section (1) of section 8 of the Central Sales Tax Act, 1956 of the purchase price of the corresponding taxable goods purchased by him (not being goods treated as capital assets or used as fuel and natural gas) shall be reduced from the amount of set-off otherwise available in respect of the said purchases.

Explanation.- For the purpose of this clause "manufactured tax free goods" will not include,-

(a) sarki pend, de-oiled cakes, and

(b) any other goods covered by SCHEDULE A, if they are sold in the course of export out of the territory of India covered by section 5 of the Central Sales Tax Act, 1956.

(b) If the claimant dealer re-sells any tax free goods and the tax-free goods are packed in any material, then an amount equal to the amount calculated at the rate notified from time to time, by the Central Government for the purposes of sub-section (1) of section 8 of the Central Sales Tax Act, 1956 of the purchase price of the corresponding purchases of packing materials, if any, shall be reduced from the amount of set-off otherwise available in respect of the said purchases of packing materials.

Provided that no reduction under this clause shall be made if the goods packed are sold in the course of export out of territory of India and the export is covered by section 5 of the Central Sales Tax Act, 1956.

(3)(a) If the claimant dealer dispatches any taxable goods outside the State, to any place within India, not by reason of sale, to his own place of business or of his agent or where the claimant dealer is a commission agent, to the place of business of his principal, then an amount equal to four percent of the purchase price of the corresponding taxable goods (not being goods treated as capital assets or used as fuel and natural gas) shall be deducted from the amount of set-off otherwise available in respect of the said purchases.

Provided that, if the taxable goods are despatched outside the State and the rate of tax specified in the SCHEDULE against the corresponding taxable goods purchased, is less than four per cent., then the reduction from set-off under this clause shall be calculated at such lower rate of tax specified in the SCHEDULE against the corresponding goods.

provided further that the deduction provided in this sub-rule shall not apply if the goods dispatched are brought back to the State within six months of the date of dispatch whether after processing or otherwise;

Provided also that, the provisions of this clause shall not be applicable in respect of the contingencies specified in clause (b)

(b) If the claimant dealer manufacturers the goods covered under entries 5, 6, 7,8,9 and 10 of Schedule "B" appended to the Act and dispatches the said goods not by reason of sale, outside the State to any place within India to his own place of business, or the place of business of his agent or where the claimant dealer is a commission agent, to the place of business of his principal, then an amount equal to four per cent. of the value of the goods so dispatched shall be reduced from the amount of the set-off otherwise available in respect of the aforesaid manufactured goods.

(4) If the claimant dealer has made a sale by way of transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract then, if the claimant dealer has opted for composition of tax under sub-section (3) of section 42, the corresponding amount of set-off other than the set-off pertaining to purchases of capital assets and set-off pertaining to goods in which property is not transferred shall be reduced and the set-off shall be allowed and calculated, -

(a) by multiplying the said amount of set-off by the fraction 16/25 where the dealer has opted to pay tax @ 8% on the total contract value, and

(b) in respect of periods starting on or after 20th June 2006 by reducing from the amount of set-off a sum equal to 4% of the purchase price on which such set-off is calculated where the dealer has opted to pay tax @ 5% on the total contract value in the case of construction contracts.

Explanation.- For the purposes of this sub-rule, the expression "claimant dealer" shall also include a sub-contractor if the principal contractor has awarded the contract or part of contract to a sub-contractor and the principal contractor has opted in respect of the said contract for the composition of tax under sub-section (3) of section 42.

(5) (a) If the business, in which the dealer is engaged is discontinued and is not transferred or, otherwise disposed of and is not continued by any other person, or, if the registration of a dealer is deemed to be cancelled as per the provision of sub-section (6A) of section 16 and is not revoked,

(b) if the dealer who is registered under the existing law on the date immediately preceding the date of commencement of the Maharashtra Goods and Services Tax Act, 2017 (Mah. XLIII of 2017) (herein after in this sub-rule referred to as "Goods and Services Tax Act") and whose registration is subsequently cancelled for the reasons as under-

(i) not liable to be registered under the Goods and Services Tax Act, or,

(ii) not enrolled on Common Portal as notified under the Goods and Services Tax Act, or,

(iii) not submitted an application duly signed, along with the information and documents specified in application, on Common Portal under the Goods and Services Tax Act,

(c) if the dealer who has not opted to pay tax under composition scheme provided as per section 42 or 43 during the previous year but opts for the composition scheme provided under the Goods and Services Tax Act,

then in such cases the set-off on the purchases (not being purchases treated as capital assets) corresponding to the goods held in stock as on the date immediately preceding the date of commencement of the Goods and Services Tax Act shall be disallowed and accordingly be reduced fully.

(6) If out of the gross receipts of a dealer in any year, receipts on account of sale are less than fifty per cent. of the total receipts, -

(a) then to the extent that dealer is a hotel or club, not being covered under composition scheme, the dealer shall be entitled to claim set-off only,-

(i) on the purchases corresponding to the food and drinks (whether alcoholic or not) which are served, supplied or, as the case may be, resold or sold, and

(ii) on the purchases of capital assets and consumables pertaining to the kitchens and sale, service or supply of the said food or drinks, and

(b) in so far as the dealer is not a hotel or restaurant, the dealer shall be entitled to claim set-off only on those purchases effected in that year where the corresponding goods are sold or resold within six months of the date of purchase or are consigned within the said period, not by way of sale to another State, to oneself or one's agent or purchases of packing materials used for packing of such goods sold, resold or consigned:

Explanation - For the purposes of this sub-rule, the "receipts" means the receipts pertaining to all activities including business activities carried out in the State but does not include the amount representing the value of the goods consigned not by way of sales to another State to oneself or one's agent.

Provided that for the purposes of clause (b), the dealer who is a manufacturer of goods not being a dealer principally engaged in doing job work or labour work shall be entitled to claim set-off on his purchases of plant and machinery which are treated as capital assets and purchases of parts, components and accessories of the said capital assets, and on purchases of consumables, stores and packing materials in respect of a period of three years from the date of effect of the certificate of registration.

(7) Omitted w.e.f. 1-5-2011.

(7A) If the claimant dealer has purchased office equipment, furniture or fixtures and has treated them as capital assets and he is not engaged in the business of transferring the right to use these goods (whether or not for a specified period) for any purpose, then the corresponding amount of set-off to which he is otherwise entitled shall be reduced by an amount equal to three percent of the purchase price on which such set-off is calculated and the balance shall be allowed.

(7B) Notwithstanding anything contained in sub-rule (6) of this rule, if the claimant dealer is holding a license for transmission or as the case may be, distribution of electricity under the Electricity Act, 2003 or is a generating company as defined in the said Act, then in respect of the periods starting on or after the 1st April 2005, save as otherwise provided under subrule (1) and (1A), an amount equal to the amount calculated at the rate notified from time to time, by the Central Government for the purposes of sub-section (1) of section 8 of the Central Sales Tax Act, 1956 of the purchase price of the goods purchased including goods treated as capital assets by him for use in the generation, transmission, or, as the case may be, distribution of electricity shall be reduced from the amount of set-off otherwise available in respect of the said purchases of goods including goods treated as capital assets.

(8) The claimant dealer shall deduct the amount required to be reduced under this rule from the amount of set-off available in respect of the period in which the contingencies specified in this rule occur and claim only the balance amount as set-off and when the amount so required to be deducted exceeds the said amount of set-off available in respect of that period, he shall pay an amount equal to the excess at the time when he is required to pay the tax in respect of the said period.

(9)(a) For the purposes of sub-rule (1), sub-rule (1A),clause (a) of sub-rule (2) and sub-rule (3), any reference to the corresponding goods on the purchase of which set-off is claimed, shall be construed in relation to any period starting on or after the 1st April 2005, as a reference to the corresponding goods (not being consumable, stores, or goods treated as capital assets, parts, components and accessories of capital assets) which are resold or are so dispatched outside the State or are used in or relation to the manufacture of goods so sold or dispatched and are contained in the goods so sold, resold or dispatched and the packing material used alongwith the goods so sold, resold or dispatched. Any reference to the corresponding purchase price, corresponding taxable goods or corresponding purchases of packing material shall be construed accordingly.

(b) While reducing set-off under,-

(i) sub-rule (2), for the purpose of determining the purchase price of the corresponding taxable goods, where it is not possible to ascertain the purchase price by reference to the books of account, the ratio of the sale price of the taxable goods and tax free goods or where there is no sale price, the value of the taxable goods and tax free goods shall be applied; and

(ii) sub-rule (3), the ratio of the value of the goods inclusive of any duty of Excise as it appears in the books of accounts of the goods dispatched as aforesaid and the sale price of other goods shall be applied for deciding the corresponding purchase price.

(10) If the dealer has executed a contract, at any time after the 1st April 2005, of processing of textiles, then set-off on the goods purchased on or after the said date, shall be allowed to the extent of tax paid on purchases in excess of the amount calculated at the rate notified from time to time, by the Central Government for the purposes of sub-section (1) of section 8 of the Central Sales Tax Act, 1956 on the purchase price,

(a) as regards the goods in respect of which property is transferred during the said processing, and

(b) as regards packing materials used for packing of the said textiles, and

(c) as regards other purchases including purchases of capital assets shall be calculated as permissible under other rules.

(11) (a) If the claimant dealer is engaged in the business of transferring the right to use (whether or not for a specified period) for any purpose, of passenger motor vehicles, then he shall be entitled to claim set-off of tax paid on the purchase of such motor vehicles only to the extent of tax payable on such transfer of right to use ;

(b) the set off as determined under clause (a) in respect of the such vehicles shall be claimed in the period in which such right to use has been transferred by the claimant dealer.