CAF-2 · Chapter 18 · Question 4 of 15
A registered manufacturer has an output tax liability of Rs. 1,000,000 for the month of August 2026. The input tax paid on raw materials during the same month is Rs. 950,000. Under Section 8B, what is the amount of sales tax payable with the return, and what is the treatment of the remaining input tax?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) B) Tax payable is Rs. 100,000; the remaining Rs. 50,000 input tax is carried forward to the next tax period.
Explanation
A registered person shall not be allowed to adjust input tax in excess of 90% of the output tax for that tax period. 90% of Rs. 1,000,000 is Rs. 900,000. Thus, the payable amount is Rs. 100,000 (1,000,000 - 900,000), and the unadjusted input tax of Rs. 50,000 (950,000 - 900,000) is carried forward.
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