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Input restriction under rule 131

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Querist : Anonymous

Querist : Anonymous (Querist)

27 June 2013 Iam a timber dealer in Karnataka purchasing timber logs from Unregistered dealers and after processing the timber logs we will sell the cut sizes and also its by products like firewood and saw dust.

Whereas saw dust is taxable @ 5.5% and cut sizes is at 14.5% and I also pay tax on URD purchases @ 14.5%. Here I am giving some example

I have utilized the above urd purchases of Rs. 6812415 fully. Now after audit sales tax authorities were restricted input tax under rule 131 of Karnataka vat act on sale of firewood of Rs. 238380 and imposed a tax Their calculation is as under

NON-DEDUCTABLE INPUT TAX= (SALES of exempt goods + non taxable transactions) X total input tax On URD Purchases
TOTAL SALES (INCLUDING NON – TAXABLE TRANSACTION)

=(238380+0) x 987800 = 25410.00
9266954

Whether the sales tax authorities are correct or not, please clarify

Querist : Anonymous

Querist : Anonymous (Querist)

29 October 2014 a decesion in this regard from karnataka high court the case is M/s. M.K.Agro tech(p) Ltd Vs The state of Karnataka on 17/07/2014 by judges1. justice .N Kumar and Justice B.Manohar

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