How does input tax credit work within the overall VAT scheme and whether tax credit is available against liability of tax under CST Act? ( AP VAT, Delhi VAT, Gujarat VAT, Haryana VAT, Karnataka VAT, KVAT, Maharashtra VAT, TNVAT, Value Added Tax (VAT), West Bengal VAT, Sales Tax )

How does input tax credit work within the overall VAT scheme and whether tax credit is available against liability of tax under CST Act?

 In order to understand how the input tax credit works, following illustrations would be useful:
ILLUSTRATION-1 (Rupees)
Amount Tax
A Purchases during the month @12.5% 1,00,000 12,500
B Local sales during the month @12.5% 1,20,000 15,000
C Output tax payable 15,000
D Less: input tax credit 15,000
E VAT payable 2,500

ILLUSTRATION-2 (Rupees)
Amount Tax
A Purchases during the month @12.5% 2,00,000 25,000
B Local sales during the month @4% 1,00,000 4,000
C Inter State sales @4% 1.00.000 4,000
D Total output tax liability (B+C) 8,000
E Input tax credit admissible 25,000
E Negative balance of input tax credit carried forwarded to next tax period (B-E) 17,000