16. Input Tax Credit

(1) Subject to the provisions of this Act, an input tax credit as provided in this section shall be claimed by a registered dealer, subject to such conditions and restrictions as may be prescribed, on sales of goods in the following circumstances, namely -

(a) when a registered dealer purchases any input within the State of Bihar from another registered dealer after paying him the tax as specified under section 14, he shall claim credit of the input tax in the manner prescribed, if the goods are sold within the State or in the course of inter-State trade and commerce;

(b) when a registered dealer —

i. purchases any input within the State from another registered dealer after paying him the tax under section 14, or

ii. purchases any input and pays tax on such purchase under section 4 of the Act,

and consumes such goods in the manufacture of any goods mentioned in clause (a), (b) and (d) of section 14, he shall claim credit of the said input tax in the manner prescribed, if the goods so manufactured are sold within the State of Bihar or in the course of inter-State trade and commerce;

(c) when a registered dealer purchases any capital goods within the State from another registered dealer after paying him the tax as specified under section 14, and uses such goods in the manufacture of any goods mentioned in clause (a), (b) and (d) of section 14 and sells the manufactured goods within the State of Bihar or in the course of inter-State trade or commerce, or otherwise, he shall claim and be allowed, in such manner as may be prescribed, credit of the amount of input tax;

(d) when a registered dealer holds in stock, on the 1st day of April, 2005, such goods as have been purchased by him on or after 1st day of April, 2004 and which have suffered the incidence of tax under the Bihar Finance Act, 1981 as it stood before its repeal by section 94 and —

i. he sells such goods within the State of Bihar or in the course of inter state trade and commerce, or

ii. he consumes such goods in the manufacture of any goods mentioned in clause (a), (b) and (d) of section 14 and the goods so manufactured are sold within the State of Bihar or in the course of inter-State trade and commerce, he shall claim credit of the input tax in the manner prescribed;

(e) when a registered dealer purchases any input within the State of Bihar from another such dealer after paying him the tax as specified under section 14 at a rate higher than four percent and transfers such goods or goods manufactured from such goods to another dealer outside the State of Bihar, he shall be allowed credit of such tax in excess of four percent, in the manner as may be prescribed:

Provided that if the claim for input tax credit under clause (a) or clause (b) or clause (c) or clause (d) or clause (e) for any month exceeds the output tax for the same month, such excess shall be carried forward for adjustment against the output tax of subsequent months, not being a month later than two years after the close of the year during which such excess had arisen and the amount of input tax remaining unadjusted after two years after the close of the year during which such excess had arisen shall be refunded to the dealer subject to the provisions of sections 68, 69 and 71 of this Act:

Provided further that input tax credit in respect of capital goods shall be allowed in the manner and over such period, not exceeding thirty-six months from the date of their acquisition, as may be prescribed:

Provided also that no credit of input tax shall be allowed in respect of capital assets purchased or acquired before the commencement of this Act.

(2) Notwithstanding anything contained in sub-section (1), where a registered dealer purchases any input in the circumstances mentioned in clause (a) or clause (b) or clause (c) or clause (d) of the said sub-section and —

(a) he despatches such goods or the goods manufactured by consuming such goods, to a commission agent registered under this Act or transfers such goods to its branch or head office within the State of Bihar for sale, as the case may be; or

(b) he supplies such goods in the course of execution of a works contract to another registered dealer to whom he has let out a sub-contract, for use in the execution thereof,

the input tax credit on the sale or supply, as the case may be, of such goods shall be claimed by the registered dealer selling the goods on commission or using the goods supplied in the execution of sub-contract, as the case may be, in accordance with the provisions of sub-section (1), in such manner as may be prescribed.

(3) No input tax credit under sub-section (1) shall be claimed or be allowed to a registered dealer —

(a) in respect of goods specified in Schedule-IV or such other goods as may be prescribed; or

(b) in respect of inputs purchased by him from another registered dealer or manufactured by him and the right wherein to use is transferred to another dealer; or

(c) in respect of inputs purchased from a registered dealer permitted to pay tax under the provisions of section 15; or

(d) in respect of inputs consumed for the manufacture of goods specified in Schedule I; or

(e) in respect of goods used for self consumption or as gift.

(4) In case the inputs or goods are used partially for the purpose specified in sub-section (3), the claim for input tax credit shall stand reduced to the extent they are so used.

(5) (a) No dealer shall claim an input tax credit in respect of inputs purchased unless he is in possession of an original copy of the tax invoice, signed and issued by the selling registered dealer, containing the prescribed particulars of sale.

(b) If the original tax invoice is lost, input tax credit shall be allowed only on the basis of a duplicate copy of the original tax invoice in the form and manner prescribed.