1[(1) Subject to sub-section (2) of this section and such conditions, restrictions
and limitations as may be prescribed, a dealer who is registered or is required to be
registered under this Act shall be entitled to a tax credit in respect of the turnover of
purchases occurring during the tax period 2[where the purchase arises] in the course
of his activities as a dealer and the goods are to be used by him directly or indirectly
for the purpose of making –
(a) sales which are liable to tax under section 3 of this Act; or
(b) sales which are not liable to tax under section 7 of this Act.
Explanation.- Sales which are not liable to tax under section 7 of this Act
involve exports from Delhi whether to other States or Union territories or to foreign
countries.]
(2) No tax credit shall be allowed –
(a) in the case of the purchase of goods for goods purchased from a person
who is not a registered dealer;
(b) for the purchase of non-creditable goods;
(c) for the purchase of goods which are to be incorporated into the structure of
a building owned or occupied by the person;
Explanation.- This sub-section does not prevent a tax credit arising for
goods and building materials that are purchased either for the purpose of re-sale in an
unmodified form, or for the performance of a works contract on a building owned or
occupied by another;
(d) for goods purchased from a dealer who has elected to pay tax under
section 16 of this Act;
[(e) for goods purchased from a casual trader;]
[{(f)} to the dealers or class of dealers specified in the Fifth Schedule except
the entry no.1 of the said Schedule.]
3[(g) to the dealers or class of dealers unless the tax paid by the purchasing
dealer has actually been deposited by the selling dealer with the Government or has
been lawfully adjusted against output tax liability and correctly reflected in the return
filed for the respective tax period.]
(3) The amount of the tax credit to which a dealer is entitled in respect of the
purchase of goods shall be the amount of input tax arising in the tax period reduced
in the manner described in sub-sections 4[(4), (6) and (10)] of this section.
(4) Where a dealer has purchased goods and the goods are to be used partly for
the purpose of making the sales referred to in sub-section (1) of this section and partly
for other purposes, the amount of the tax credit shall be reduced proportionately.
(5) The method used by a dealer to determine the extent to which the goods are
used in the manner specified in sub-section (4) of this section, shall be fair and
reasonable in the circumstances:
PROVIDED that the Commissioner may -
(a) after giving reasons in writing, reject the method adopted by the
dealer and calculate the amount of tax credit; and
(b) prescribe methods for calculating the amount of tax credit or the
amount of any adjustment or reduction of a tax credit in certain instances.
Explanation.- A person may object in the manner referred to in
section 74 of this Act to a decision of the Commissioner to reject a method of
calculating a tax credit.
(6) [Notwithstanding anything contained to the contrary in sub-section (1), where -]
(a) a dealer has purchased goods (other than capital goods) for which a tax
credit arises under sub-section (1) of this section;
(b) the goods or goods manufactured out of such goods are to be exported
from Delhi by way of transfer to a –
(i) non-resident consignment agent; or
(ii) non-resident branch of the dealer; and
(c) the transfer will not be by way of a sale made in Delhi;
the amount of the tax credit shall be reduced by the prescribed percentage.
(7) For the removal of doubt, no tax credit shall be allowed for -
(a) the purchase of goods from an unregistered dealer;
(b) the purchase of goods which are used exclusively for the manufacture,
processing or packing of goods specified in the First Schedule.
1[(c) any purchase of consumables or of capital goods where the dealer is
exclusively engaged in doing job work or labour work and is not engaged in the
business of manufacturing of goods for sale by him and incidental to the business of
job work or labour work, obtains any waste or scrap goods which are sold by him.]
(8) The tax credit may be claimed by a dealer only if he holds a tax invoice at
the time the prescribed return for the tax period is furnished.
2[(9)(a) Notwithstanding anything contained to the contrary in sub-sections (1) and
(3) and subject to sub-section (2), tax credit in respect of capital goods shall be
allowed as follows: -
(i) 1/3rd of the input tax on such capital goods arising in the tax period, in
the same tax period;
(ii) 3[balance 2/3rd of such input tax, in equal proportions, in corresponding
tax periods, in two immediately successive financial years :]
PROVIDED that, where the dealer sells such capital goods, the dealer
shall be allowed as tax credit, the balance amount of the input tax, if any, in respect
of such capital goods as has not been earlier availed as tax credit, such tax credit
shall be allowed in the tax period in which such capital goods are sold and only after
adjusting the output tax payable by him:
4[PROVIDED FURTHER that where the dealer transfers such capital
goods from Delhi otherwise than by way of sale before the expiry of three years from the
date of purchase, he shall, after claiming the balance amount of input tax, if any, not
availed earlier in respect of such capital goods, reduce the input tax credit by the
prescribed percentage of the purchase price of such capital goods and make adjustments
in the input tax credit in the tax period in which these capital goods are so transferred:
PROVIDED ALSO that where a dealer has purchased capital goods and
the capital goods are to be used partly for the purpose of making sales referred to in
sub-section (1) of this section and partly for other purposes, the amount of tax credit
shall be reduced proportionately:]
PROVIDED ALSO that no tax credit in respect of capital goods shall be
allowed if such capital goods are used exclusively for the purpose of making sale of
exempted goods specified in the first schedule:
PROVIDED ALSO that no tax credit in respect of capital goods shall be
allowed on that part of the value of such capital goods which represents the amount
of input tax on such capital goods, which the dealer claims as depreciation under
section 32 of the Income Tax Act, 1961 (43 of 1961).
(b) If any capital goods in respect of which tax credit is allowed under clause
(a) of this sub-section is transferred to any other person otherwise than by way of
sale at the fair market value before the expiry of a period of five years from the date
of purchase, the tax credit claimed in respect of such purchase shall be 1[reversed] in
the tax period during which such transfer takes place.]
[(10) Notwithstanding anything contained to the contrary in sub-section (1),
where –
(a) a dealer has purchased goods (other than capital goods) for which a tax
credit arises under sub-section (1) of this section; and,
(b) the goods or goods manufactured out of such goods are to be exported
from Delhi by way of sale made under sub-section (1) of Section 8 of the Central
Sales Tax Act, 1956,
the amount of the tax credit shall be reduced by the prescribed percentage.]
[(11) Subject to sub-section (1), (2) and (3) of this section, the tax credit of goods
to be used for sale, as defined in sub-clause (vi) of clause (zc) of sub-section (1) of
Section 2 of the Act, shall be allowed as follows:
(a) 1/4th of the input tax on such goods arising in the tax period, in the same
tax period;
(b) balance 3/4th of such input tax, in equal proportions, in corresponding tax
periods, in three immediately successive financial years.]
