PART VI

PARTIAL EXEMPTION, CAPITAL GOODS AND SPECIAL ACCOUNTING SCHEMES

Apportionment

Rule 131. Apportionment of input tax in the case of a dealer falling under section 17 shall be calculated as follows.-

(1) All input tax directly relating to sale of goods exempt under section 5 other than such goods sold in the course of export out of the territory of India, is non-deductible.

(2) All input tax directly relating to taxable sales may be deducted, subject to the provisions of section 11.

(3) Any input tax relating to both sale of taxable goods and exempt goods, including inputs used for non-taxable transactions, that is, the non-identifiable input tax, may be deducted, based on the following formula.-

Sales of taxable goods x non-identifiable input tax = deductible element of input tax.

Total sales

(including non-taxable transactions)

(4) For the purpose of clause (3),

(a) ‘Sale of taxable goods’ would be the aggregate of the amounts specified in clauses (b), (c), (d), (e) and (f) of sub-rule (1) of rule 3 relating to sale of goods other than those exempt under section 5 which are not sold in the course of export out of the territory of India; and

(b) “total sales” means total turnover less.-

(i) the amount specified in clause (a) of sub-rule (1) of rule 3, and

(ii) the deductions specified in clause (e) of sub-rule (2) of rule 3.

(5) Where in the case of any dealer, the Commissioner is of the opinion that the application of the formula prescribed under clause (3) does not give the correct amount of deductible input tax, he may direct the dealer to adopt a special formula as he may specify.