What if my input tax is much higher than my output tax. for example i
buy a commodity for Rs. 112.50 (VAT paid is 12.5% i.e. Rs.12.50 on 100
Rs. base price) i sell the same at 4% vat (i.e. output VAT is 4% on Rs.
150 which is my selling price, i.e. output vat comes ton Rs.6.00). Will
i be able to claim credit of Rs. 12.50 - Rs. 6.00 - Rs. 6.50? Please
Prakash ji, you are eligible to a total input credit of Rs.12.50 which you have paid on your purchase. And as you have paid output tax at Rs.6.00 on your sale, you can setoff your liability of Rs.6.00 with your input credit of Rs.12.50 and you will still be left with the remaining credit of Rs.6.50 i.e (Rs.12.50 minus Rs.6.00).