Capital goods scheme

Rule 133. (1) A dealer claiming input tax under section 12, in respect of capital goods, as notified under clause (7) of section 2, shall, apply in Form VAT 170 to the jurisdictional local VAT officer or VAT Sub-officer within thirty days of commencement of commercial production or sale of taxable goods.

(2) The jurisdictional local VAT officer or VAT Sub-officer shall review such application to ensure that it contains all the information required and notify the dealer within one month of the date of receipt of the application that it was received within the prescribed time, and where it is not satisfied that the particulars contained in the application are correct and complete, and after giving the dealer a reasonable opportunity of being heard, it shall reject the application for reasons to be recorded in writing.

(3) The jurisdictional local VAT officer or VAT Sub-officer shall inform a dealer eligible for input tax rebate in Form VAT 175 within thirty days of receipt of an application which is correct and complete.

(4) Deduction of input tax under section 12 shall be subject to the following conditions.-

(a) In the case of a dealer selling goods in the course of export out of the territory of India and the capital goods are used for the sale of such goods, wholly or partially, and also used in the business the deduction shall be adjusted or refunded as specified in sub-rule (1) of rules 127 and 128.

(b) In other cases the deduction shall be apportioned in equal monthly instalments over a period of twelve months from the date indicated in Form VAT 170 during which period the capital goods are used for the business of taxable goods, wholly or partially.

(c) Where there is a change in use of the capital goods from sale of exempt goods or non-taxable transactions to sale of taxable goods wholly or partially, the value of capital goods eligible for rebate shall be calculated on the basis of a formula to be notified by the Commissioner.

(d) The deduction shall be claimed by the dealer in his monthly return.

(e) No deduction of input tax shall be allowed where the use of capital goods relates wholly to the sale of exempt goods, other than when such goods are sold in the course of export out of the territory of India.

(f) Where the use of capital goods relates to both the sale of goods in the course of export out of the territory of India or sale of taxable and exempt goods and also to taxable goods that are disposed otherwise than by way of sale or non-taxable transactions, the deductible element of input tax shall be calculated on the basis of the formula specified under rule 131.

(g) No deduction of input tax in respect of capital goods shall be allowed to a dealer registered under section 22 and the taxable turnover of the dealer is less than the limit specified in sub-section (1) of section 22 during the year in which the capital goods are purchased.

(5)(a) Where there is a change in use of the capital goods, after the claim for input tax rebate has been allowed, and the dealer is no longer eligible for such input tax rebate, the dealer shall inform the jurisdictional local VAT officer or VAT sub-officer within ten days of such change in use.

(b) The jurisdictional local VAT officer or VAT sub-officer shall notify the dealer in Form VAT 180 that he is no longer eligible for the input tax rebate under the scheme with effect from the end of the month preceding the month in which such change of use occurred.

(6) Where the capital goods are sold within a period of twelve months from the date of the commencement of commercial production or sale of taxable goods or sale of any goods in the course of export out of the territory of India,-

(a) the purchasing dealer may claim the full input tax in his next return where the sale price falls below the notified value, or claim input tax under the provisions of this Rule; and

(b) the selling dealer shall pay full tax on such sale without any input tax rebate.

(7) Where the capital goods are disposed of otherwise than by way of sale within a period of twelve months from the date of the commencement of commercial production or sale of taxable goods or sale of any goods in the course of export out of the territory of India the dealer shall pay tax calculated on the prevailing market value of such goods at the time of such disposal.