(1) Subject to the provisions of this Act, for the purpose of calculating the net tax payable by a registered dealer for any tax period, an input tax credit as determined under this section shall be allowed to such registered dealer against the tax paid or payable in respect of all sales or purchases taxable under this Act, other than sales or purchases of goods specified in Schedule C and Schedule D.

(1-a) Notwithstanding anything to the contrary contained in this Act, a dealer shall not be entitled for input tax credit in respect of purchase of the following taxable goods subject to the circumstances mentioned against each such goods-

(i) Coal when used for generation of electricity for sale and captive use.

(ii) Furnace oil except when purchased for resale.

(iii) Kerosene except when purchased for resale.

(iv) All automobiles including commercial vehicle, two wheelers and three wheelers required to be registered under the Motor Vehicles Act, 1988 except when purchased for resale and including tyres and tubes, spare parts and accessories for the repair and maintenance thereof.

(v) Air conditioning units except when purchased far resale and except when used in plant and laboratory.

(vi) Earth moving equipment such as dozers, loaders and excavators; and poclain, dumpers and tippers except when purchased for resale.

(vii) Machinery and equipments including accessories and component parts thereof purchased for use in mining.

(viii) Machinery and equipments including accessories and component parts thereof purchased for use in construction activities such as mixer, road roller, paver, vibrator.

(ix) Fuels used for automobiles or used for captive power generation or used in power plants.

(x) Natural gas except when purchased for resale.

(2) The input tax credit to which a registered dealer is entitled under subsection (1) shall be the amount of tax paid by the registered dealer to the seller on his turnover of purchase of goods during the tax period, calculated, subject to the provisions contained in sub-sections (3), (4) and (5), in such manner as may be prescribed.

(3) Input tax credit shall be allowed for purchases made within the State from a registered dealer holding a valid certificate of registration in respect of goods intended for the purpose of -

(a) sale or resale by him in the State;

(b) use as inputs or as capital goods in the manufacturing of goods within the state, other than those specified in Schedule A and Schedule C and Schedule D for sale;

(c) sale of goods subject to levy of tax at zero rate under section 18;

(d) for use as containers or materials for packing of goods, other than those exempt from tax under this Act, for sale or resale ; or

(e) transfer of stock of taxable goods other than by way of sale, to any place outside the State :

Provided that -

(a) the input tax credit on purchases intended for the purpose of clause(e) shall only be allowed in respect of the amount of tax paid or payable in excess of tax at the rate of four per centum;

(b) if goods purchased are used partially for the purposes specified in clause (e), input tax credit shall be allowed proportionately to the extent they are used for such purposes; and

(c) where a registered dealer sells or despatches goods, both taxable and exempt under this Act, the input tax credit shall be allowed proportionately only in relation to the goods which are not so exempt.

(d) the input tax credit on purchase when sold in course of interstate trade or commerce shall be allowed only to the extent of the Central Sales Tax payable under the Central Sales Tax Act, 1956(74of 1956).

(3-a) Notwithstanding anything contained in this Act, no amount of input tax credit shall be allowed to a registered dealer on any purchase of goods in excess of the amount of such tax actually paid under this Act.

(4) Notwithstanding anything contained in this section or elsewhere in this Act, and subject to such conditions and restrictions and in such manner, as may be prescribed, input tax credit may be allowed partially or in phased manner, in respect of such goods or such class of dealers or in such cases, as may be prescribed.

(5) (a) Input tax credit on capital goods shall be allowed from the date of first sale of taxable goods produced or manufactured after the commencement of such production and shall be adjusted against the output tax over a period not exceeding three years:

Provided that no input tax credit shall be allowed on such capital goods used for the purposes and in the circumstances as specified in Schedule 'D'

(b) Input tax credit under clause (a) of this sub-section shall be allowed in lumpsum provided the value of such capital goods is rupees one lakh or less.

(c) Input tax credit on capital goods shall be allowed only on purchase of such goods made on or after the appointed day.

(d) In case of closure of business before the commencement of commercial production, no input tax credit on capital goods shall be allowed and input tax credit carried forward, if any, shall be forfeited.

(e) In case where there is production of both taxable goods and goods exempt from tax, the input tax credit admissible on capital goods shall be determined in the manner prescribed.

(f) where the used capital goods are sold, the same shall be subject to tax under this Act.

(6) Input tax credit shall not be claimed by the dealer for any tax period until the dealer receives the tax invoice in original evidencing the amount of input tax :

Provided that for good and sufficient reasons to be recorded in writing, the Commissioner may, in the prescribed manner, allow such credit subject to such conditions and restrictions as may be specified in the order allowing the credit.

(7) A registered dealer who intends to claim input tax credit shall, for the purpose of determining the amount of input tax credit, maintain accounts and such other records as may be prescribed in respect of the purchases and sales made by him and stock in trade held.

(8) No input tax credit shall be claimed by or be allowed to a registered dealer -

(a) in respect of any taxable goods purchased by him from another registered dealer for resale but given away by way of free sample or gift;

(b) who makes payment of turnover tax as provided in section 16;

(c) in respect of capital goods used for the purposes and in the circumstances as specified in Schedule;

(d) in respect of goods brought from outside the State against the tax paid in any other State;

(e) in respect of stock of goods remaining unsold at the time of closure of business;

(f) in respect of goods purchased on payment of tax, if such goods are not sold because of any theft, damage and destruction;

(g) where the tax invoice is not available with the dealer or there is evidence that the same has not been issued by the selling registered dealer from whom the goods are purported to have been purchased:

Provided that input tax credit on the stock of goods,-

(i) held on the date of registration as admissible under sub-section (11): and

(ii) held by a registered dealer on the date, he is liable to pay tax under section 11 in lieu of tax payable under section 16;

shall be allowed without tax invoice subject to production of evidence that such goods have been purchased from a registered dealer inside the State on payment of tax under this Act, supported by a retail invoice, to the satisfaction of the assessing authority;

(h) in respect of goods purchased from a dealer whose certificate of registration has been suspended;

(i) in respect of sale of goods specified in Schedule A;

(j) in respect of sale of goods specified in Schedule C;

(k) in respect of input or capital goods other than those covered under Schedules A, C and D used in manufacture of goods where the finished products are exempted from tax either in whole or in part under this Act or under the Central Sales Tax Act, (74 of1956);

(l) executing works contract, in relation to works contracts executed by him, where he has exercised option under sub-section (3) of section 11 to pay tax by way of composition; and

(m) in any other case as the Government may, by notification, specify.

(8-a) Where sale price of any taxable goods, for any reason, is less than the purchase price of the said goods, the input tax credit on purchase of such goods shall be allowed only to the extent of the output tax payable on the sale of such goods and in such case if the input tax credit has been availed in excess of the output tax paid or payable, it shall be reversed in the manner prescribed.

(9) If goods purchased -

(a) are intended for any of the purposes specified under sub-section (3) but are subsequently used otherwise, or

(b) are lost due to theft, damage or for any other reason, or

(c) remain unsold at the time of closure of business, the input tax credit availed in respect of purchase of such goods shall be deducted from the input tax credit admissible for the tax period during which any one or more of such events occurs; or

(d) are subsequently transferred to any place outside the State otherwise than by way of sale on which input tax credit has already been availed at the full rate, or

(e) remain unutilized or unsold on the date on which the exercise of option for composition of tax under this Act, is allowed,or

(f) remain unutilized or unsold on the date on which the liability of the dealer to pay tax under section 11 is changed to section 16,or

(g) are utilized in manufacture of goods exempted from tax, on which input tax credit has been availed in a tax period prior to its utilization, by a dealer manufacturing both taxable goods and goods exempted from tax, or

(h) are exempted from levy of tax subsequently, or

(i) are retumed to the selling dealer and necessary adjustment is made by revising the tax invoice or retail invoice, or by issue of credit or debit notes in respect of such goods:

Provided that if part of the goods so purchased are used otherwise or lost or remain unsold, the amount of reverse tax credit shall be proportionately calculated :

Provided further that if no input tax credit is available for such deduction, the input tax credit availed of shall be repayable in the manner prescribed.

Provided also that in case of clause (d), the input tax credit so reversed shall be limited to four percentum of the value of the goods in respect of which input tax credit has been allowed.

(10) Where the Commissioner is of the opinion that the method used by a registered dealer to determine the extent to which goods are used, consumed or supplied or intended to be used, consumed or supplied, in the course of manufacturing taxable goods or making sales liable to tax, is not fair and appropriate in the circumstances, he may, after giving the dealer an opportunity of being heard, for reasons to be recorded in writing, reject the method adopted by the dealer and determine the amount of input tax credit admissible.

(11) Subject to the restrictions specified in sub-section (8), input tax credit shall be allowed to a registered dealer in respect of the amount of tax paid or payable on purchase of taxable goods from a registered dealer, which the dealer holds on the date of registration, if such purchases were made within three months prior to the date of his registration.