53. Reduction in set-off.
The set-off available under any rule shall be reduced and shall accordingly bedisallowed in part or full in the event of any of the contingencies specified below and to the extent specified.
(1) If the claimant dealer has used any taxable goods as fuel, then an amount equal to 1[three per cent] of the corresponding purchase price shall be reduced from the amount of set-off otherwise available in respect of the said purchase.
1a[(1A) On the purchases of natural gas to which sub-rule (1) does not apply, unless the natural gas purchased is resold or sold in the course of inter-State trade or commerce or in the course of export
out of the territory of India or dispatched outside the State, to any place within India, not by reason of sale, to his own place of business or of his agent or where the claimant dealer is a commission agent, to
the place of business of his principal, an amount equal to three per cent. of the purchase price shall be reduced from the amount of set-off otherwise available in respect of the said purchases.
Explanation.- For the purpose of this sub-rule, natural gas will be deemed to have been sold or resold if the sale is after conversion from one form of natural gas to another form.]
(2) (a) If the claimant dealer manufactures any tax free goods then an amount equal to1[2[the amount calculated at the rate notified from time to time, by the CentralGovernment for the purposes of sub-section (1) of section 8 of the Central Sales Tax Act, 1956]] of the purchase price of the corresponding taxable goods purchased by him (not being goods treated as capital assets or used as fuel2a[and natural gas]) shall be reduced from the amount of setoff otherwise available in respect of the said purchases.
3[Explanation.- For the purpose of this clause manufactured tax free goods will not include,-
(a)sarki pend, de-oiled cakes, and
(b)any other goods covered by SCHEDULE A, if they are sold in the course of export out of the territory of India covered by section 5 of the Central Sales Tax Act, 1956.]
(b) If the claimant dealer resells any tax free goods and the tax-free goods are packed in any material, then an amount equal to 1[2[the amount calculated atthe rate notified from time to time, by the Central Government for the purposesof sub-section (1) of section 8 of the Central Sales Tax Act, 1956]]. of thepurchase price of the corresponding purchases of packing materials, if any, shall be reduced from the amount of set-off otherwise available in respect of the said purchases of packing materials.
5[Provided that no reduction under this clause shall be made if the goods packed are sold in the course of export out of territory of India and the export iscovered by section 5 of the Central Sales Tax Act, 1956]
(3) 5a[(a)] If the claimant dealer dispatches any taxable goods outside the State, to any place within India, not by reason of sale, to his own place of business or of his agent or where the claimant dealer is a commission agent, to the place ofbusiness of his principal, then an amount equal to 5b[four per cent.] of thepurchase price of the corresponding taxable goods (not being goods treated ascapital assets or used as fuel 2a[and natural gas]) shall be deducted from theamount of set-off otherwise available in respect of the said purchases.
6[Provided that, if the taxable goods are dispatched outside the state and the rate of tax specified in the SCHEDULE against the corresponding taxable goods purchased is less than four per cent., then the reduction from set-off under this clause shall be calculated at such lower rate of tax specified in the SCHEDULE against the corresponding goods.]
7[Provided further that] the deduction provided in this sub-rule shall notapply if the goods dispatched are brought back to the State within six months of the date of dispatch whether after processing or otherwise.
8[8a[Provided also that], the provisions of this clause shall not be applicable in respect of the contingencies specified in clause (b)]
8b[(b) If the claimant dealer manufacturers the goods covered under entries 5, 6, 7, 8, 9 and 10 of Schedule appended to the Act and dispatches the said goods not by reason of sale,
outside the State to any place within India to his own place of business, or the place of business of his agent or where the claimant dealer is a commission agent, to the place of business of his principal, then an amount equal to 8c[four per cent.] of the value of the goods so dispatched shall be reduced from the amount of the set-off otherwise available in respect of the aforesaid manufactured goods.]
(4)If the claimant dealer has made a sale by way of transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract then, if the claimant dealer has opted for composition of tax under sub-section (3) of section 42, 9[the corresponding amount of set-off other than the set-off pertaining to purchases of capital assets and set-off pertaining to goods in whichproperty is not transferred shall be reduced and the set-off shall be allowed and calculated,
(a)by multiplying the said amount of set- off by the fraction 16/25 where the dealer has opted to pay tax @ 8% on the total contract value, and
(b) in respect of periods starting on or after 10[20th June 2006] by reducing from the amount of set-off a sum equal to 4% of the purchase price on which such set-off is calculated where the dealer has opted to pay tax @ 5% on the total contract value in the case of construction contracts.],
11[Explanation: For the purposes of this sub-rule, the expression claimant dealer shall also include a sub-contractor if the principal contractor has awarded the contract or part of contract to a sub- contractor and the principal contractor has opted in respect of the said contract for the composition of tax under sub-section(3) of section 42.]
(5) If the business in which the dealer is engaged is discontinued and isnot transferred or otherwise disposed of and is not continued by any other person,then the set-off on purchases not being purchases treated as capital assets, corresponding to the goods held in stock at the time of discontinuance shall be disallowed and accordingly be reduced fully.
12[(6) If out of the gross receipts of a dealer in any year, receipts on account of sale areless than fifty per cent. of the total receipts,
(a)then to the extent that dealer is a hotel or club, not being covered under composition scheme, the dealer shall be entitled to claim set-off only,
(i)on the purchases corresponding to the food and drinks (whetheralcoholic or not) which are served, supplied or, as the case may be, resold or sold, and
(ii)on the purchases of capital assets and consumables pertaining to the kitchens and sale, service or supply of the said food or drinks, and
(b) in so far as the dealer is not a hotel or restaurant, the dealer shall be entitled to claim set-off only on those purchases effected in that year where the corresponding goods are sold or resold within six months of the date of purchase or are consigned within the said period, not by way ofsale to another State, to oneself or one’s agent or purchases of packingmaterials used for packing of such goods sold, resold or consigned:
Provided that for the purposes of clause (b), the dealer who is amanufacturer of goods not being a dealer principally engaged in doing job work or labour work shall be entitled to claim set- off on his purchases of plant and machinery which are treated as capital assets and purchases of parts, components and accessories of the said capital assets, and on purchases of consumables, stores and packing materials in respect of a period of three years 13[from the] date of effect of the certificate of registration.]
14[Explanation. For the purposes of this sub-rule, the receipts means the receipts pertaining to all activities including business activities carried out inthe State but does not include the amount representing the value of the goods consigned not by way of sales to another State to oneself or one’s agent.]
15[(7) ******]
16[(7A) If the claimant dealer has purchased office equipment, furniture or fixtures and has treated them as capital assets and he is not engaged in the business oftransferring the right to use these goods (whether or not for a specified period)for any purpose, then the corresponding amount of set-off to which he is otherwiseentitled shall be reduced by an amount equal to 17[three per cent of the purchaseprice] on which such set-off is calculated and the balance shall be allowed.]
18[(7B) If the claimant dealer is holding a licence for transmission or as the case may be, distribution of electricity under the Electricity Act, 2003 or is a generating companyas defined in the said Act, then in respect of the periods starting on or after the 1stApril 2005, save as otherwise provided under 18a[sub-rule (1) and (1A)], an amountequal to the amount calculated at the rate notified from time to time, by the Central Government for the purposes of sub-section (1) of section 8 of theCentral Sales Tax Act, 1956 of the purchase price of the goods purchasedincluding goods treated as capital assets by him for use in the generation,transmission, or, as the case may be, distribution of electricity shall be reducedfrom the amount of set- off otherwise available in respect of the said purchasesof goods including goods treated as capital assets.]
(8) The claimant dealer shall deduct the amount required to be reduced under this rule from the amount of set-off available in respect of the period in which the contingencies specified in this rule occur and claim only the balance amount asset-off and when the amount so required to be deducted exceeds the said amount ofset-off available in respect of that period, he shall pay an amount equal to the excess at the time when he is required to pay the tax in respect of the saidperiod.
19[(9)(a) For the purposes of sub-rule (1), 20[sub-rule (1A),] clause (a) of sub-rule (2) and sub-rule (3), any reference to the corresponding goods on the purchase of which set-off is claimed, shall be construed in relation to any period starting on or after the 1st April 2005, as a reference to the corresponding goods (not being consumable, stores, or goods treated as capital assets, parts, components andaccessories of capital assets 21[* * * ] ) which are resold or are so dispatchedoutside the State or are used in or relation to the manufacture of goods so sold or dispatched and are contained in the goods so sold, resold or dispatched and the packing material used along with the goods so sold, resold or dispatched.Any reference to the corresponding purchase price, corresponding taxable goods or corresponding purchases of packing material shall be construed accordingly.
(b) While reducing set-off under,
(i) sub-rule (2), for the purpose of determining the purchase price of the corresponding taxable goods, where it is not possible to ascertain the purchase price by reference to the books of account, the ratio of the sale price of the taxable goods and tax free goods or where there is no saleprice, the value of the taxable goods and tax free goods shall be applied; and
(ii) sub-rule (3), the ratio of the value of the goods inclusive of any duty ofExcise as it appears in the books of account of the goods dispatched asaforesaid and the sale price of other goods shall be applied for deciding the corresponding purchase price.
(10) If the dealer has executed a contract, at any time after the 1st April 2005, ofprocessing of textiles, then set-off on the goods purchased on or after the said date, shall be allowed to the extent of tax paid on purchases in excess of the amount calculated at the rate notified from time to time, by the Central Government for the purposes of sub-section (1) of section 8 of the Central Sales Tax Act, 1956 on the purchase price,
(a) as regards the goods in respect of which property is transferred during the said processing, and
(b) as regards packing materials used for packing of the said textiles, and
(c) as regards other purchases including purchases of capital assets shall be calculated as permissible under other rules.]
22[(11) (a) If the claimant dealer is engaged in the business of transferring the right to use (whether or not for a specified period) for any purpose, of passenger motor vehicles, then he shall be entitled to claim set-off of tax paid on the purchase of such motor vehicles only to the extent of tax payable on such transfer of right to use;
(b) the set off as determined under clause (a) in respect of the such vehicles shall be claimed in the period in which such right to use has been transferred by the claimant dealer.]
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1. These words were substituted from 1st April 2007 by Notification No.VAT-1507/C.R.17/ Taxation-1. Dt. 31st October 2007. Earlier these words read as, "four percent"
1a This sub-rule was inserted by Notification No.VAT-1512/C.R.61/Taxation-1 dated 1st June 2012 w.e.f.1st May 2012.
2.These words were substituted from 1st April 2007 by Notification No. VAT/1508/CR-69/ Taxation-1 Dt. 23rd October 2008. Earlier these words read as, "three percent"
2a. These words were inserted by Notification No.VAT-1512/C.R.61/Taxation-1 dated 1st June 2012 w.e.f.1st May 2012.
3.This Explanation was added with effect from 1st April 2005 by Notification No. STR.1506/ CR-38/ Taxation-1 Dt. 8th September 2006 and again substituted by Notification No.VAT-1512/C.R.61/Taxation-1 dated 1st June 2012 w.e.f.1st May 2012. Prior to substitution this Explanation was read as:
Explanation. For the purpose of this clause manufacturedtax free goods will not include4[goods to which Schedule A applies if] the said goods are sold in the course of export out of the territory of India and the export is covered by section 5 of the Central Sales Tax Act, 1956,
4.These words were substituted from 1st November 2008 by Notification No. VAT/1508/CR- 69/Taxation-1 Dt. 23rd October 2008. Earlier these words read as, "sugar or fabrics to which entry 45 of Schedule A applies and"
5.This proviso was added by Notification No VAT-1509/CR-16/Taxation-1 dt. 18th June 2009.
5a This rule renumbered as clause (a) by Notification No.VAT 1512/C.R. 12/Taxation-1 dated 16th February 2012.
5b This word substituted for the words *[**[the amount calculated at the rate notified from time to time, by the CentralGovernment for the purposes of sub- section (1) of section 8 of the Central Sales Tax Act, 1956]] by Notification No.VAT 1512/CR 43/Taxation-1 dated 31st March 2012 w.e.f.1st April 2012.
* These words were substituted from 1st April 2007 by Notification No.VAT-1507/C.R.17/ Taxation-1. Dt. 31st October 2007. Earlier these words read as, "four percente"
** These words were substituted from 1st April 2007 by Notification No. VAT/1508/CR-69/ Taxation-1 Dt. 23rd October 2008. Earlier these words read as, "three percent"
6. This Explanation was added with effect from 1st April 2005 by Notification No. STR.1506/ CR-38/ Taxation-1 Dt. 8th September 2006 and again substituted as proviso by Notification No.VAT1512/C.R.61/Taxation-1 dated 1st June 2012 w.e.f.1stMay 2012. Prior to substitution this explanation was read as:
Explanation.(a) If the taxable goods dispatched outsidethe State *[*.*.*.], then an amount equal to one per cent. of the purchase price of the corresponding taxable goods, in so far as the corresponding taxable goods are covered by any entry in schedule B, shall be deductedfrom the amount of set-off otherwise available in respect of the said purchases
**[(b) *.*.*.];
*These words were deleted by Notification No.VAT-1507/C.R.17/Taxation-1.Dt. 31st October 2007. Earlier these words read as, "are the goods covered by any entry in Schedule B"
**This clause (b) of Explanation was deleted by Notification No. VAT-1507/C.R.17/Taxation-1. Dt. 31st October 2007. Earlier this clause read as, "˜If the goods purchased are covered by the entry 29 of Schedule C and the said goods are dispatched outside the State in the same form in which they were purchased or, as the case may be, without doing anything to them which amounts or results in a manufacture, then the purchase price for the purposes of this sub-rule shall mean the actual purchase price as it appears in the books of account and not the maximum retail price printed on the package containing the said goods;"
7. These words were substituted for the words Provided that by by Notification No.VAT1512/C.R.61/Taxation-1 dated 1stJune 2012 w.e.f.1st May 2012.
8 This proviso added by Notification No. VAT 1512/C.R. 12/Taxation-1 dated 16th February 2012.
8a These words were substituted for the words Provided further that by Notification No.VAT1512/C.R.61/Taxation-1 dated 1stJune 2012 w.e.f.1st May 2012.
8b This clause added by Notification No. VAT 1512/C.R. 12/Taxation-1 dated 16th February 2012.
8c These words were substituted for the words two per cent. by the Notification No.VAT 1512/CR 43/Taxation-1 dated 31stMarch 2012 w.e.f.1st April 2012.
9.These words were substituted by Notification No. STR.1506/CR-38/Taxation-1 Dt. 8th September 2006. Earlier these words read as, "the corresponding amount of set- off to which he is otherwise entitled shall be reduced and the set-off to be allowed shall accordingly be calculated by multiplying the said amount of set-off by the fraction 16/25"
10. These figures, letters and word were substituted and shall be deemed to have been substituted w.e.f. 8thSeptember 2006 by Notification No. VAT 1507/C.R.17/Taxation-1.Dt.31st October 2007. Earlier these figures, letters and word, read as ‘21st June 2006"
11. This explanation was added with effect from 1st April 2005 by Notification No. VAT-1508/ CR-18/ Taxation-1. Dt. 23rd October 2008.
12. This sub-rule (6) was substituted with effect from 8th September 2006 by Notification No.VAT-1508/CR-18/ Taxation-1. Dt. 23rd October 2008. Earlier this sub-rule read as:
*FOR THE PERIOD FROM 8TH SEPTEMBER 2006
(6) If out of the gross receipts of a dealer in any year, receipts on account of sale are less than fifty per cent. ofthe total receipts, then the dealer shall be entitled to claim set- off only 1[on the purchases of plant and machinery if the dealer has treated the plant and machinery as capital assets or] on those purchases effected inthat year where the corresponding goods are sold within six months of the date of purchase or are consigned withinthe said period, not by way of sale to another State, to oneself or one’s agent or purchases of packingmaterials used for packing of such goods sold or consigned and in the case of Hotels, clubs purchases of capital assets and consumables pertaining to the Kitchens and services of food and drinks (whetheralcoholic or not).
Explanation. For the purposes of this sub-rule, receipts means the receipts pertaining to all activitiesincluding business activities carried out in the State but does not include the amount representing the value of the goods consigned not by way of sale to another State to oneself or one’s agent’]
1 The words [on the purchases of plant and machinery if the dealer has treated the plant and machinery as capital assets or] inserted by notification No.VAT-1507/C.R.17/Taxation-1 dt. 31st October 2007
This sub-rule was substituted by Notification No. STR.1506/CR-38/Taxation-1 Dt. 8th September 2006. Earlier this sub-rule read as
FOR THE PERIOD UP TO 7TH SEPTEMBER 2006
6) If out of the gross receipts of a dealer, receipts on account of sale are less than fifty per cent. of the total receipts, then the dealer shall be entitled to claim set-off only on the purchases corresponding to goods sold, consigned not by way of sale to another State to oneself or one’s agent or purchases of packing materials used for packing of such goods sold or consigned
13 These words were substituted and shall be deemed to be substituted with effect from 8th September 2006 by Notification No VAT-1509/CR-16/Taxation-1 dt. 18th June 2009. Earlier these words read as ‘starting from the end of the year containing the’.
14 This Explanation was added shall be added and deemed to have been added with effect from the 8th September 2006 by Notification No. VAT-1509/CR-16/Taxation-1 dt. 18th June 2009
15 This sub-rule (7) deleted w.e.f. 1st May 2011 by Notification No. VAT-1511/CR-58/Taxation-1 dt. 29th April 2011. Earlier this rule read as:
(7)If the claimant dealer is holding Liquor Vendor Licence in Form FLII appended to the Bombay Foreign Liquor Rules, 1953 or, in Form CLIII or in Form CL/FL/TOD/III appended to the Maharashtra CountryLiquor Rules, 1973, and where the actual sale price is less than the maximum retail price (M.R.P.) the set-off, drawback shall be granted to the extent of sum determined in accordance with the formula given below :
TABLE
SP / M.R.P. X SUM of Set-off, drawback, etc. determined
SP = Actual turnover of sales of goods covered by entry 1 or 2 of Scheduled D
MRP = Total turnover according to the Maximum Retail Price of the liquor sold:
Provided that in any case, the drawback, set-off, or, as the case may be, a refund under this sub-rule shall not exceed the amount of tax payable by the claimant dealer on sale of such goods.
*[Provided further that, nothing in this sub-rule shall apply to the Indian Naval Canteen Service and the CanteenStores Department]
**[Explanation: For the purposes of this sub-rule, the expression actual sale price shall mean the aggregate ofsale price and the tax charged separately, if any, and in any other case the sale price inclusive of tax.]
*This proviso was added with effect from 1st April 2005 by Notification No.VAT-1508/CR- 69/Taxation-1. Dt. 23rd October 2008. This proviso deleted w.e.f. 1st May 2011 by Notification No.VAT-1511/CR-58/Taxation-1 dt. 29th April 2011
**This Explanation was substituted by Notification No. VAT-1508/CR-69/ Taxation-1. Dt. 23rd October 2008 Earlier explanation read as:
[Explanation. For the purposes of this sub-rule the expression the actual sale price shall mean sale price exclusive of the element of tax where tax is charged separately and where tax is not charged separately,the price arrived at by applying sub-rule (1) of rule 57]
This Explanation was added by Notification No. STR.1506/CR-38/Taxation-1 Dt. 8th September 2006. This Explanation deleted w.e.f. 1st May 2011 by Notification No.VAT-1511/CR-58/Taxation-1 dt. 29th April 2011
16 This sub-rule was inserted by Notification No. STR.1506/CR-38/Taxation-1 Dt. 8th September 2006
17 These words were substituted from 1st April 2007 by Notification No. VAT-1507/C.R.17/ Taxation-1. Dt. 31st October 2007. Earlier these words read as, "4% of the purchase price"
18 This sub-rule was substituted and shall be deemed to have been substituted w.e.f. 31st October 2007 by Notification No.VAT-1508/CR.18/Taxation-1. Dt. 31st October 2008. This rule was originally inserted by Notification No. VAT-1507/C.R.17/Taxation-1. Dt. 31st October 2007, rule 9(7), and it read as ‘If the claimant dealer is holding alicense for transmission or, as the case may be, for distribution of electricity under the Electricity Act, 2003, then inrespect of any period starting on or after the 1st April 2005 and ending on the 31st March 2007, an amount equal to four per cent. of the purchase price of the goods purchased by him for use in the distribution or transmission ofelectricity (including the goods treated as capital assets) and an amount equal to three per cent. of the saidpurchase price in respect of any period starting on or after the 1st April 2007, shall be reduced from the amountof set-off otherwise available in respect of the said purchase of goods including goods treated as capital assets’
18a These words were substituted for the words sub-rule (1) by Notification No.VAT1512/C.R.61/Taxation-1 dated 1st June 2012 w.e.f.1st May 2012.
19 These sub-rules (9) and (10) were added from 1st November 2008 by Notification No. VAT-1508/CR.18/Taxation-1. Dt.23rd October 2008.
20 These words were inserted by Notification No.VAT1512/C.R.61/Taxation-1 dated 1st June 2012 w.e.f.1st May 2012.
21 These words were deleted by Notification No. VAT-1512/C.R.61/Taxation-1 dated 1st June 2012 w.e.f.1st May 2012. Prior to deletion these words were read as: and goods used as fuel
22 This sub-rule was inserted by Notification No.No. VAT/1516/CR 53 /Taxation-1 dated 1st April 2016 w.e.f.1st April 2016.
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