Section 11. Tax credit

(1)(a) A registered dealer who has purchased the taxable goods (hereinafter referred to as the “purchasing dealer”) shall be entitled to claim tax credit equal to the amount of,-

(i) tax collected from the purchasing dealer by a registered dealer from whom he has purchased such goods or the tax payable by the purchasing dealer to a registered dealer who has sold such goods to him during the tax period, or 

(ii) tax paid by him during the tax period under sub-section (1) or (2) of section 9 or

(iii) tax paid by the purchasing dealer under the Gujarat Tax on Entry of Specified Goods into Local Areas Act, 2001.

(b)The tax credit to be so claimed under this sub-section shall be subject to the provisions of sub-sections (2) to (12); and the tax credit shall be calculated in such manner as may be prescribed.

(2) The registered dealer who intends to claim the tax credit shall maintain the register and the books of accounts in such manner as may be prescribed.

(3)(a) Subject to the provisions of this section, tax credit to be claimed under sub-section (1) shall be allowed to a purchasing dealer on his purchase of taxable goods made in the State, which are intended for the purpose of-

(i) sale or re-sale by him in the State;

(ii) sale in the course of inter-State trade and commerce

(iii) branch transfer or consignment of taxable goods to other States (subject to the provision of Sub-clause (b) below);

(iv) sales in the course of export out of the territory of India;

(v) ales to export oriented units of the units in Special Economic Zoners for sale in the in the course of export out of the territory of India;

(vi) use as raw material in the manufacture of taxable goods intended for (i) to (v) above or in the packing of the goods so manufactured.

(vii) use as capital goods meant for use in manufacturer of taxable goods intended for (i) to (vi) above subject to the condition that such capital goods are purchased after the appointed day.

Provided that if purchases are used partially for the purposes specified in this sub-section, the tax credit shall be allowed proportionate to the extent they are used for the purposes specified in this sub-section”.(b) Notwithstanding anything contained in this section, the amount of tax credit in respect of a dealer shall be reduced by the amount of tax calculated at the rate of four per cent. on the turnover of purchases-

(i) of taxable goods consigned or dispatched for branch transfer or to his agent outside the State, or

(ii) of goods taxable which are used as raw materials in the manufacture, or in the packing of goods which are dispatched outside the State in the course of branch transfer or consignment or to his agent outside the State.

(iii) of fuels used for the manufacture of goods.

(4) The tax credit shall not be claimed by the purchasing dealer until the tax period in which he receives from a registered dealer from whom he has purchased taxable goods, a tax invoice (in original) Containing Particulars as may be prescribed under Sub-section (1) of Section 60 evidencing the amount of tax.

(5) Notwithstanding anything contained in this Act, tax credit shall not be allowed for purchases-

(a) made from any person other than a registered dealer under this Act;

(b) made from a dealer who is not liable to pay tax under this Act;

(c) made from a registered dealer who has been permitted under section 14 to pay lump sum amount of tax in lieu of tax

(d) made prior to the relevant date of liability to pay tax as provided in sub-section (3) of section 3;

(dd) made prior to the date of registration.

(e) made in the course of inter-State trade and commerce;

(f) of the goods (not being taxable goods dispatched outside the State in the course of branch transfer or consignment) which are disposed of otherwise than in sale, resale or manufacture;

(g) of the goods specified in the Schedule I or the goods exempt from whole of tax by a notification under sub-section (2) of section 5

(h) of the goods which are used in manufacture of goods specified in Schedule I or the goods exempt from the whole of the tax by a notification under sub-section (2) of section 5 or in the packing of goods so manufactured;

(i) of capital goods used in the manufacture of goods specified in Schedule I or the goods exempt from the whole of the tax by a notification under sub-section (2) of section 5 or in generation of electrical energy including captive power.

(j) of vehicles of any type and its equipment, accessories or spareparts (except when purchasing dealer is engaged in the business of sales of such goods)

(k) of the property or goods not connected with the business of the dealer;

(l) of the goods which are used as fuel in generation of electrical energy meant for captive use or otherwise;

(ll) of petrol, high speed diesel, crude oil and lignite unless such purchase is intended for resale.

(m) of the goods which are used as fuel in motor vehicles;

(mm) of capital goods, used in transfer of property in goods (whether as goods or in some other form) involved in execution of works contract

(mmm) of the goods for which right to use is transferred for any purpose (whether or not for a specified period), for cash, deferred payment or other valuable considerations.

(mmmm) made from a dealer after the name of such dealer has been published under sub-section (11) of section 27 or section 97.

(n) of the goods which remain as unsold stock at the time of closure of business;

(nn) of the goods purchased during the period when the permission granted under clause (a) of sub-section (1) of section 14 has remained valid under clause (b) of that subsection.

(o) where original invoice does not contain the details of tax charged separately by the selling dealer from whom purchasing dealer has purchased the goods;

(p) where original tax invoice or duplicate thereof duly authenticated in accordance with the rules made in this behalf is not available with purchasing dealer or there is evidence that the same has not been issued by the selling dealer from whom the goods are purported to have been purchased;

Notwithstanding anything contained in clause (a) or (b) in this sub-section and subject to conditions as may be prescribed, a registered dealer shall be allowed to claim tax credit in respect of purchase tax paid by him under subsection (1) or (2) of section 9.

(6) The State Government may, by notification in the Official Gazette, specify any goods or the class of dealers that shall not be entitled to whole or partial tax credit.

(7) Where a registered dealer without entering into a transaction of sale, issues to another registered dealer tax invoice, retail invoice, bill or cash memorandum with the intention to defraud the Government revenue or with the intention that the Government may be defrauded of its revenue, the Commissioner may, after making such inquiry as he thinks fit and giving a reasonable opportunity of being heard, deny the benefit of tax credit, in respect of such transaction, to such registered dealers issuing or accepting such tax invoice, retail invoice, bill or cash memorandum either prospectively 16 or retrospectively from such date as the Commissioner may, having regard to the circumstances of the case, fix.

(7A) Notwithstanding anything contained in this section, in no case the amount of tax credit on any purchase of goods shall exceed the amount of tax in r~spec~of the same goods, actually paid, if any, under this Act or any earlier law, into Government treasury.

Provided that, where purchase tax is shown as payable in the return by the claimant dealer on the purchase of the said goods effected by him, it shall be deemed to have been paid into Government treasury for the purpose of this sub-section.

Provided further that, where the tax l~vied or leviable under this Act or any earlier law is remitted or to be remitted or, deferred or is deferrable under any tax incentive scheme granted by the Government of Gujarat, then the tax shall be deemed to have been paid into the Government treasury for the purpose of this sub-section.

(8)(a) If the goods purchased were intended for the purposes specified under sub-section (3) and are subsequently used fully or partly for purposes other than those specified under the said sub-section or are used fully or partly in the circumstances described in sub-section (5), the tax credit, if availed of, shall be reduced on account of such use, from the tax credit being claimed for the tax period during which such use has taken place; and such reduction shall be done in the manner as may be prescribed.

(b) Where the capital goods referred to in sub-clause (vii) of clause (a) of sub-section (3) are not used continuously for a full period of five years, in the State, the amount of tax credit shall be reduced proportionately having regard to the period falling short of the period of five years.

(9) The registered dealer may claim the amount of net tax credit, which shall be determined in the manner as may be prescribed.

(10) Where any purchaser, being a registered dealer, has been issued with a credit note or debit note in terms of section 61 or if he returns or rejects goods purchased, as a consequence of which the tax credit availed by him in any period in respect of which the purchase of goods relates, becomes either short or excess, he shall compensate such short or excess by adjusting the amount of tax credit allowed to him in respect of the tax period in which the credit note or debit note has been issued or goods are returned, subject to such conditions as may be prescribed.

(11) A registered dealer shall apply fair and reasonable method to determine, for the purpose of this section, the extent to which the goods are sold, used, consumed or supplied, or intended to be sold, used, consumed or supplied. The Commissioner may, after giving the dealer an opportunity of being heard and for the reasons to be recorded in writing, reject the method adopted by the dealer and calculate the amount of tax credit as he deems fit.

(12) Subject to the exceptions as may be prescribed by the rules, any dealer including the Commission agent shall not be permitted to transfer his tax credit to any other dealer or as the case may be, the principal

Explanation-For the purpose of this section the amount of tax credit on any purchase of goods shall not exceed the amount of tax actually paid or payable under this Act in respect of the same goods.