Input tax is the VAT charged by your supplier on your business purchases in the State of Telangana. It includes the VAT on goods purchased for resale, raw materials, consumables, packing materials, capital goods and general office equipment. It excludes taxes paid other than VAT on purchases from dealers not registered for VAT or on purchases from outside the state or outside the country.

It does not include VAT paid on goods not meant for business. VAT charged in these circumstances is not your input tax.

The purchases on which you cannot claim a credit for your input tax are DEFINED AS PER Rule20 (2) of APVAT Act:

a	All automobiles including commercial vehicles/two wheelers/three wheelers required to be registered under the Motor Vehicles Act 1988 and including spare parts for the repair and maintenance thereof; unless you are in the business of dealing in these goods.
b	Fuels used for automobiles or used for captive power generation or used for power plants.
c	Air conditioning units other than used in plant and laboratory, restaurants or eating establishments, unless you are in the business of dealing in these goods.
d	Any goods purchased and used for personal consumption.
e	Any goods purchased and provided free of charge as gifts otherwise than by way of business practice.
f	Any goods purchased and accounted for in the business but utilized for the purpose of providing facilities to employees including any residential accommodation.
g	Crude oil used for conversion / refining into petroleum products.
h	Natural gas and coal used for power generation.\
i	Any input used in construction or maintenance of any buildings including factory or office buildings, unless you are in the business of executing works contracts.
j	Earth moving equipment such as bulldozers, JCB’s and poclain etc., and parts and accessories thereof, unless you are in the business of dealing in these goods.
k	Generators and Parts and accessories thereof used for captive generation unless you are in the business of dealing in these goods.

The above list of goods is generally called ‘negative list’.

When you purchase goods and have to pay VAT, ask yourself “is this purchase wholly for my taxable business activities”? If it is for business activities and is not listed in the answer to Question 2 above, you will be able to claim a credit for the VAT you have paid, which is your input tax credit. You must possess an original tax invoice to claim a credit for input tax.

You must have an original tax invoice to substantiate a claim for input tax credit.
Without this document you will be unable to claim a credit.

When you complete your VAT return each month the amounts you enter in Boxes (7B), (8B), and (9B) is your claim for credit of input tax on purchases of goods at the tax rates of 4%, 12.5% and 1% respectively.

If the input tax exceeds the output tax in a tax period i.e. total in Box (11) exceeds the amount in Box (20) of the VAT return, you can claim credit for the excess in Box (24). You also have the option of adjusting this credit towards CST tax due if any for that tax period in Box 24(a). The balance credit will be carried forward to the next VAT return.

If you have any international exports in this tax period, you can claim refund of excess credit in Box (23) of VAT return.

Yes. If the VAT return filed does not contain correct amount of input tax credit, an application on Form VAT 213 shall be submitted to the tax officer within a period of six months from the end of the relevant tax period.

Where a VAT dealer is making taxable sales and exempt transactions in a tax period and inputs are common for both, the amount which can be claimed as input tax credit for the purchases of the goods at the tax rate of 4% shall be calculated by the formula

B A x --- C Where
A	is the total amount of input tax for the tax rate of 4% for the tax period, excluding the tax paid on the purchase of negative list goods on which input tax cannot be claimed
B	is the value of taxable sales for the tax period and which shall include value of international exports and value of inter-state sales of taxable goods (B is the sum total of Boxes 13 A, 14 A, 16 A, 17 A and 19 A on your VAT return);
C	is the total sale turnover, which includes value of branch transfers and consignment sales (C is the sum total of Boxes 12 A, 13 A, 14 A, 16 A, 17 A and 19 A on your VAT return).

The result of this calculation is the amount of input tax that can be claimed in Box (7B) of your VAT return. The value related to the tax claimed must be entered in Box (7A) of the VAT return and the balance of the value including the unclaimed input tax entered in box (6A) of the VAT return. For tax rate of 12.5% paid on inputs, the tax amounting to 8.5% portion is given as input tax credit in total and for the remaining 4% portion the formula mentioned above shall be applied. The total of these calculations is the amount of input tax that can be claimed in Box (8B) of your VAT return. The value related to the tax claimed must be entered in Box (8A) of the VAT return and the balance of the value including the unclaimed input tax entered in Box (6A) of the VAT return. Note: If you are dealing in Gold & Jewellery, for tax rate of 1% paid on inputs, the formula mentioned above for tax rate of 4% shall be adopted and the result of this calculation can be claimed in Box (9A) of your VAT return. The value related to the tax claimed must be entered in Box (9B) of the VAT return and the balance of the value including the unclaimed input tax entered in Box (6A).

You are required to file an annexure to monthly return in Form VAT 200A every tax period. In addition to the monthly annexure, you are required to file an annual return in Form VAT 200B. The excess input tax credit claimed shall be paid back or the balance input tax credit eligible can be claimed in the tax return for March.

If you are not having common inputs and are able to establish that specific inputs are meant for specific output, then you can adopt the following method to arrive at eligible input tax credit every tax period:

1	You can take credit for the full amount of input tax paid on inputs used separately for taxable goods. You need to keep with you evidence in the form of stock registers or other accounts for establishing the above.
2	For the common inputs, you can claim input tax credit by applying the formula Ax B/C for the common inputs used for taxable sale and stock transfers.
3	You are required to file an annexure to monthly return in Form VAT 200A every tax period. In addition to the monthly annexure, you are required to file an annual return in Form VAT 200B. The excess input credit claimed shall be paid back or the balance input credit eligible can be claimed in the tax return for March.

If you are buying and selling the goods in the same form, you can claim full input tax credit in respect of all taxable goods purchased in every tax period. The adjustment for the input tax credit pertaining to common inputs can be made in the year-end in the return for March.

You are required to make a declaration in the Form VAT 200 D for every tax period along with tax return giving the break up of your turnovers and input taxes. For the common inputs, you shall repay input tax related to exempt element of common inputs after making adjustment in the tax return for March by filing Form VAT 200B for the period of twelve months ending March. In the Form VAT 200B, the eligible input tax credit shall be calculated by applying formula

A x B C Where
A	is the total amount of input tax for common inputs for each tax rate excluding the tax paid on negative list goods
B	is the sales turnover of taxable goods including zero-rated sales
C	is the “total turnover” including sales of exempt goods

Where the value of taxable sales is 95% or more of the total value for that tax period, you can claim credit for the full amount of input tax paid on purchases excluding the tax paid on purchase of goods mentioned in negative list. You are not required to file any declaration every month but you should make annual adjustment by filing Form VAT 200 B in the month of March by following the calculation mentioned in answer to Question No.2.

Where the value of sales of exempt goods is 95% or more of the total value for that tax period, you cannot claim credit for any input tax paid on purchases. You are not required to file any declaration every month but you should make annual adjustment by filing Form VAT 200 B in the month of March by following the calculation mentioned in answer to Question No.2.

If you are a manufacturer and use common inputs for making taxable sales and exempt sales in a tax period, the amount, which can be claimed as input tax credit for the purchases of the goods at each tax rate shall be calculated by the formula

A x B C Where
A	is the amount of input tax relating to common inputs for each tax rate for the tax period; excluding the tax paid on negative list goods.
B	is the value of taxable sales for the tax period and which shall include value of international exports and value of inter-state sales of taxable goods – B is sum total of Boxes 13 A, 14 A, 16 A, 17 A and 19 A on your VAT return.
C	is the total sale turnover which includes exempt sales – C is sum total of Boxes 12 A, 13 A, 14 A, 16 A, 17 A and 19 A on your VAT return.

The result of this calculation is the amount of input tax that can be claimed in Box (7B) and (8B) of your VAT return for the tax rates of 4% and 12.5% respectively. The values related to the tax claimed must be entered in Box (7A) and, (8A) of the VAT return respectively and the balance of the value including the unclaimed input tax entered in box (6A) of the VAT return.

You are required to file an annexure to monthly tax return in Form VAT 200 A. In addition to the monthly annexure, you are required to make an annual adjustment in Form VAT 200B. The excess input credit claimed shall be paid back or the balance input credit eligible can be claimed in the tax return for March.

If you are able to establish that specific inputs which are meant for specific output, then you can adopt the following method to arrive at eligible input tax credit every tax period:

1	ou can take credit for the full amount of input tax paid on inputs used separately for taxable goods. You need to keep with you evidence in the form of stockregisters or other accounts for establishing the above.
2	or the common inputs, you can claim input tax credit by applying the formula Ax B/C for the common inputs used for taxable sale and exempt sales.
3	You are required to file an annexure to monthly return in Form VAT 200A every tax period. In addition to the monthly annexure, you are required to make an annual adjustment in Form VAT 200B. The excess input credit claimed shall be paid back or the balance input tax credit eligible can be claimed in the tax return for March.
4	Please note that once you adopt a particular method to calculate input tax credit, you need to be under that method upto the end of March. However, in case you wish to change the method of calculating input tax credit, you must intimate such option to your jurisdictional authority.

Where a VAT dealer is making taxable sales, exempt sales and branch transfers/consignment sales in a tax period, the amount which can be claimed as input tax credit for the purchases of the goods at tax rate of 4% shall be calculated by the formula

B A x ——— C Where
A	is the total amount of input tax for tax rate of 4% for the tax period; excluding thetax paid on the negative list goods (Refer Leaflet 04-A).
B	is the value of taxable sales for the tax period and which shall include value of international exports and value of inter-state sales of taxable goods-B is sum total of Boxes 13 A, 14 A, 16 A, 17 A and 19 A on your VAT return.
C	is the total sale turnover, which includes value of branch transfers and consignment sales–C is sum total of Boxes 12 A, 13 A, 14 A, 16 A, 17 A and 19 A on your VAT return.

The result of this calculation is the amount of input tax that can be claimed in Box (7B) of your VAT return. The value related to the tax claimed must be entered in Box (7A) of the VAT return and the balance of the value including the unclaimed input tax entered in box (6A) of the VAT return.

For tax rate of 12.5% paid on inputs, the tax amounting to 8.5% portion is given as input tax credit and for the remaining 4% portion; the formula mentioned above shall be applied. The total of these calculations is the amount of input tax that can be claimed in Box (8B) of your VAT return. The value related to the tax claimed must be entered in Box (8A) of the VAT return and the balance of the value including the unclaimed input tax entered in Box (6A) of the VAT return.

Note: If you are dealing in Gold & Jewellery, for tax rate of 1% paid on inputs, the formula mentioned above for tax rate of 4% shall be adopted and the result of this calculation can be claimed in Box (9A) of your VAT return. The value related to the tax claimed must be entered in Box (9B) of the VAT return and the balance of the value including the unclaimed input tax entered in Box (6A).

You are required to file an annexure to monthly return in Form VAT 200A every tax period. In addition to the monthly annexure, you are required to file an annual return in Form VAT 200B. The excess input credit claimed shall be paid back or the balance input credit eligible can be claimed in the tax return for March.

The Deputy Commissioner of your division may impose any conditions or a particular method for apportionment of input tax credit.

Normally, you are eligible to claim input tax credit on your purchases of:

	raw materials;
	Capital goods eg: machinery, equipment for use in the business;
	packing material;
	Tools and accessories used in the business; and
	Goods for resale.

However, you cannot claim credit for VAT paid on goods not meant for business and those goods listed in the APVAT Rules 2005.

You cannot claim an input tax credit for the following goods that are defined in list as per Rule 20 (2) of APVAT Act.

a	All automobiles including commercial vehicles / two wheelers / three wheelers required to be registered under the Motor Vehicles Act 1988 and including tyres and tubes, spare parts and accessories for the repair and maintenance thereof; unless you are in the business of dealing in these goods.
b	Fuels used for automobiles or used for captive power generation or used in power plants.
c	Air conditioning units other than those used in plant and laboratory, restaurants or eating establishments, unless you are in the business of dealing in these goods.
d	Any goods purchased and used for personal consumption.
e	Any goods purchased and provided free of charge as gifts otherwise than by way of business practice.
f	Any goods purchased and accounted for in the business but utilized for the purpose of providing facilities to employees including any residential accommodation.
g	Crude oil used for conversion / refining into petroleum products.s.
h	Natural Gas and coal used for power generation.
i	Any inputs used in construction or maintenance of any buildings including factory or office buildings, unless you are in the business of executing works contracts.
j	Earth moving equipment such as bulldozers, JCB’s and poclain etc., and spares and accessories thereof unless you are in the business of dealing in these goods.
k	Generators and accessories thereof used for captive power generation unless you are in the business of dealing in these goods.
l	Goods listed in Schedule VI to the Act.

If you are making taxable and exempt sales you may only be entitled to claim a credit of input tax for the part related to taxable sales

You must have an original tax invoice to substantiate a claim for input tax credit. If you do not possess such a document you must obtain one, otherwise you will not be eligible to claim a credit.

However, please note that you need not file these invoices to claim your ITC in the monthly return. You may retain all the original VAT invoices in you files

When you complete your VAT return each month you can claim an input tax credit on that return.

If the claim for input tax credit exceeds the amount of output tax on the return, you are entitled to a refund or to carry forward a credit. You will be able to claim a refund of excess input tax if you make international exports. You can also adjust excess credit against your Tax due under CST Act for the Tax period.