Can a dealer whose input tax credit exceeds the output tax payable in tax period or in a year claim refund of the excess credit of input tax?
Since the rate of tax on input and sales is the same in the case of a dealer, there will only be value addition and there may not be a situation where the input tax credit exceeds the output tax payable. However in the case of a manufacturer, it may happen that the rate of tax on raw materials and packing material is higher than the tax on the output and there may be a input tax / Output tax mismatch in spite of the value addition and the manufacturer may carry forward a substantial unadjusted input tax credit. Section 18 of the model VAT bill provides as follows: 1. If the input tax credit of a registered dealer other than an exporter selling goods outside the territory of India determined under section 17 of this Act for a period exceeds the tax liability for the period, the excess credit shall be set-off against any outstanding tax, penalty or interest under this act. 2. The excess input tax credit after adjustment under sub-section (1) may be carried forward as an input tax credit
