Rule 53 of MVAT states that if a manufacturer sells taxfree goods, Input VAT on corresponding purchases will be reduced by 3% of PP...............now, how this corresponding PP can be calculated when it is hard to seperate purchases for manufacture of taxable and taxfree goods???
You don't have an option but to apply the ratio :
STEP 1 : The ratio will be the ratio of the sales of tax free goods and taxable goods
STEP 2 : Take the total purchase value for all the goods purchased * (the above ratio)
The value obtained in STEP 2 will be multiplied by 3% to get the retention value which will be subtracted from the total set off available
Ok ....
Thnx a lot ...........
CAclubindia
