There is a formula for calculating the Input credit eligibility in order to take the benefit of the VAT tax. VAT paid when purchases are made can be set-off against the VAT collected from sale of the goods.
The formula A * B / C is the way for calculating the eligible input credit.
This formula is only applicable when there are Consignment sales, branch & stock transfers. The formula is calculated two times - one for the 4% VAT and the other for the 12.5%.
Where A = Input VAT paid @ 4% / 12.5%.
B = Total sales other than Consignment sales
C = Total sales ( Consignment, Export, VAT, CST Sales)
Take the values of the above said A * B / C and then first apply the formula to find the eligible VAT @ 4%.
In the second step seggragate the 12.5% in to 8.5 /12.5 and 4/12.5. Callculate the eligible Input credit for the seggregated 4/12.5 . A=4/12.5*B/ C
Add (4%) + (8.5/12.5) + (4/12.5 *B/C).
The sum total of these three is the eligible input credit.
This is to subtracted from the VAT payable and then remit it to the Govt....
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