Disallow of Input vat

[MANOJ KUMAR]

Dear Sir,

Good afternoon.

My query is that is input disallow if by product is exempt. such as if when we process the wheat in mill we got Atta, Suji, Maida, Rawa and Choker but in case Atta, Suji, Maida and Rawa is Taxable in verious states but Choker is exempt.in this case input vat disallow in ratio of choker?

Pls answer me as soon as possible urgent basis

[YAGAY and SUN]

choker is a by-product hence no need to reverse the proportionate input tax credit under HVAT Act, 2003

AI Summary

Input VAT disallowance avoided where exempt by-product, maintaining full input tax credit entitlement for manufacturers.
Where a manufacturing process yields taxable products and an exempt by-product, the by-product classification means there is no requirement to reverse proportionate input VAT; the manufacturer may retain the full input tax credit attributable to the inputs used in the overall process rather than apportioning and reversing credit on the exempt by-product.