How can I calculate the Input Tax credit on purchases against which partial credit is available? Please tell me.

how to calculate taxes on purchases

Best Answer

preritwadh wa

If you are using the second method as explained in the last question, you can avail input tax credit of all purchases of input that you credit into the inventory “for use in manufacture of taxable goods” while all the purchases of inputs that are credited to the inventory “for use in manufacture of exempted goods”, shall not be entitled for input tax credit.

If you are using the first method, at the end of each quarter, the input tax charged on purchases for which partial credit is available, is to be proportionately divided using the following formula.

I. Input tax charged on purchases, for which partial credit is available, made during

the quarter.

T. Total sales of taxable manufactured goods made during the quarter and zero rated sales.

E. Total sales of exempt manufactured made during the quarter + revenues from outputs not available under VAT system.

Finally, at the time of filing the last quarter return, you are required to perform the same calculation based on the total value of purchases for which partial credit is available, and total value of sales (of exempted and taxable manufactured goods) made during the year. This will be the total credit allowable for the year (on account of inputs for which partial credit is available). After adjusting the credits already taken in the previous quarters, the remaining credit can be availed in the last quarter.

Source: qna.economictimes.indiatimes.com

Category: Taxes

Similar articles: