(1) No tax credit shall be allowed—
(a) in the case of the purchase of goods for goods purchased from a person who is not a registered dealer;
(b) for the purchase of non-creditable goods as listed in the Third Schedule;
(c) for the purchase of goods which are to be incorporated into the structure of a building owned or occupied by the person;
(d) for goods purchased from a dealer who has elected to pay tax under section 16;
(e) for goods purchased from a casual trader;
(f) to the dealers or class of dealers unless the tax paid by the purchasing dealer has actually been deposited by the selling dealer with the Government or has been lawfully adjusted against output tax liability and correctly reflected in the return filed for the respective tax period.
(2) The amount of the tax credit to which a dealer is entitled in respect of the purchase of goods shall be the amount of input tax arising in the tax period reduced in the manner described in sub-sections (3), (5) and (9).
(3) Where a dealer has purchased goods and the goods are to be used partly for the purpose of making the sales referred to in sub-section (1) and partly for other purposes, the amount of the tax credit shall be reduced proportionately.
(4) The method used by a dealer to determine the extent to which the goods are used in the manner specified in sub-section (4), shall be fair and reasonable in the circumstances:
Provided that the Commissioner may—
(a) after giving reasons in writing, reject the method adopted by the dealer and calculate the amount of tax credit; and
(b) prescribe methods for calculating the amount of tax credit or the amount of any adjustment or reduction of a tax credit in certain instances.
(5) Notwithstanding anything to the contrary contained in sub-section (1), where—
(a) a dealer has purchased goods (other than capital goods) for which a tax credit arises under sub-section (1);
(b) the goods or goods manufactured out of such goods are to be exported from Andaman and Nicobar Islands by way of transfer to a—
(i) non-resident consignment agent; or
(ii) non-resident branch of the dealer; and Tax credit.
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(c) the transfer shall not be by way of a sale made in Andaman and Nicobar Islands; the amount of the tax credit shall be reduced by the prescribed percentage.
Explanation.—For the removal of doubts, it is hereby clarified that no tax credit shall be allowed for the purchase of goods from an unregistered dealer.
(6) The tax credit may be claimed by a dealer only if he holds a tax invoice at the time the prescribed return for the tax period is furnished.
(7) Notwithstanding anything to the contrary contained in sub-section (1), where—
(a) a dealer has purchased goods (other than capital goods) for which a tax credit arises under sub-section (1); and
(b) the goods or goods manufactured out of such goods are to be exported from Andaman and Nicobar Islands by way of sale made under sub-section (1) of section 8 of the Central Sales Tax Act, 1956, the amount of the tax credit shall be reduced by the prescribed percentage.
(8) Subject to the provisions of sub-sections (1) and (2), the tax credit of goods to be used for sale, as defined in sub-clause (v) of clause (zb) of sub-section (1) of section 2, shall be allowed as follows:—
(a) 1/4th of the input tax on such goods arising in the tax period, in the same tax period;
(b) balance 3/4th of such input tax, in equal proportions, in corresponding tax periods, in three immediately successive financial years.