You have to post an incoming invoice to the sum of USD 1,200. The tax amount of USD 200 (20 percent) comprises 12 percent input tax (USD 120) and a non-deductible portion of eight percent (USD 80). You can now post the non-deductible portion to a separate account (see the following figure, example A) or distribute it to the G/L account and asset line items (see the following figure, example B).
If the whole input tax amount is non-deductible, no input tax posting is made; the non-deductible input tax can be posted to a separate account (see the following figure, example C) or be distributed between the G/L account and asset line items.
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