(1) For the purpose of determining his tax liability in respect of taxable supplies made during a tax period, a registered person shall, subject to the provisions of section 73, be entitled to deduct input tax paid or payable during the tax period for the purpose of taxable supplies made, or to be made, by him from the output tax (***) that is due from him in respect of that tax period and to make such other adjustments as are specified in Section 9:

Provided that the taxpayer may adjust input tax paid on the purchases in the immediate three preceding tax periods from the output tax subject to the condition that the taxpayer specifies the reasons for such delayed input tax adjustment in the revised sales tax return for such period or in the return for the immediately succeeding tax period.

(2) A registered person shall not be entitled to deduct input tax from output tax unless,--

(i) in case of a claim for input tax in respect of a taxable supply made (***), he holds a tax invoice in his name and bearing his registration number in respect of such supply for which a return is furnished;

(ii) in case of goods imported into Pakistan, he holds bill of entry or goods declaration in his name and showing his sales tax registration number, duly cleared by the customs under section 79 or section 104 of the Customs Act, 1969 (IV of 1969);

(iii) in case of goods purchased in auction, he holds a treasury challan , in his name and bearing his registration number, showing payment of sales tax;

(3) Notwithstanding anything in sub-sections (1) and (2), the Federal Government may, by a special order, subject to such conditions, limitations or restrictions as may be specified therein allow a registered person to deduct input tax paid by him from the output tax determined or to be determined as due from him under this Act.