When a company incurs input tax that is pertaining to a supply that is specifically specified as an exempted supply, then the company shall not recover this particular input tax. In other words, input tax pertaining to exempted supplies are not recoverable.
In some cases, companies incur input tax that is pertaining to both taxable supplies and exempted supplies. Here, it shall make necessary calculations, in which it is only allowed to claim the input tax that is pertaining to the taxable supplies only, and not the exempted supplies, this is what we call “Input Tax Apportionment”.
Source: gccfintax.com
