Head office is in Telangana & Branch is in AP; who gets VAT Input on Transfers ?

Dear All

Here is a Practical Doubt on VAT.

Head office is situated in Telangana State and Branch office in AP. HO purchases Goods worth of Rs. 1000/- and Input is Rs. 125/- @ 12.50%. HO transfers the same to its branch in AP.

I know it is a Form F transfer and it is a exempt transaction and no need to pay any tax on this transfer. But Here the questions are:

1) Whether Branch is entitled to use Input Credit? or HO?

2) I heard 8.50% is only the eligible input after reversing 4% input. is it true really or 2% only the reversible amount?

If branch is eligible for such input, please suggest practically how it is to be made? 

Thanks in advance