Can raw materials used for development be deductable

A company’s R & D department stored a number of raw materials in its warehouse. All of them are for the development of new products, can the raw material input VAT be transferred out from VAT ?

"Provisional Regulations on VAT" Article 10 (1) provides that: for non-VAT taxable items, VAT exempted items, the collective welfare or personal consumption goods or taxable services.

Detailed Rule for the Implementation of the "VAT Provisional Regulations" Article V: if a marketing activity that involves both non-VAT taxable goods and services or a mixed sales activity. First paragraph of the alleged non-VAT taxable services refers to the part of the business, transportation, construction, finance, post and telecommunications, culture and sports, entertainment, service tariff levied ranges labor.

Article 23, No. 10 of the Regulations (1) items and the rules referred to non-VAT taxable items refers to the provision of non-VAT taxable services, transfer of intangible assets, sale of real estate and real estate construction in progress.

"Ministry of Finance, State Administration of Taxation on the Shanghai to carry out Transport and Some Modern Service Industry Business Tax Levy VAT Pilot of the Notice" ( Cai Shui [ 2011 ] No. 111 ) Article 8, taxable services refers to the land transport services, marine transportation services, air transport services, pipeline transportation services, research and development and technical services, information technology services, cultural and creative services, logistics support services, tangible personal property leasing services, forensic consulting services.

R & D and technical services includes research and development services, technology transfer services, technical-consulting services, contract energy management services, engineering survey and exploration services.

1.  R & D services refer to new technologies, new products, new processes or new materials and systems research and experimental development activities.

According to the above provisions, corporate recipients of raw materials, if used for the development of new products (it includes the Shanghai pilot areas paid to provide research and development service), the input tax can be deducted from the output tax; if paid for non-pilot areas to provide research and development services, input tax shall be deducted from the output tax.