VAT Procedures IPCC Paper 4: Taxation Chapter 6 CA. Naveen Rajpurohit
Eligibility for registration As per white paper threshold limit will be Rs. 5 lakhs, option for voluntary registration would be available All existing dealer (under sales tax regime) will be automatically registered under the VAT Act New dealers within 30 days from the date of commencement of the business required to maintain an application for registration Only dealers can register under the VAT law
Compulsory registration dealers whose turnover exceeds the threshold limit is mandatorily required to register with department. Failure to register, department may suo-moto register the dealer Voluntary registration dealers whose total turnover is less than the threshold limit can voluntarily register with the department
Cancellation of registration Discontinuance of business; Disposal of business Transfer of business to a new location Turnover falls below the threshold limit TIN consists of 11 numbers. First two number represents State code and balance 9 will vary from State to State
Following records to be maintained: Purchase record Sales record VAT Account (input and output tax account) Separate record for exempted sale Apart from the above records, the dealer is also required to maintain copy of invoice, credit / debit note, returns, tax paid details etc., which is required to be produced to the officer
Returns must be filed monthly / quarterly / annually as specified in the State VAT law It must be accompanied with the payment challans Furnish the details of output tax / input tax / net tax payable Permitted to file revise return
Return filing procedures are designed with the objective of: Reducing the compliance cost; Automatically ensures that the dealer comply with the provision of law Ensures that all required data is included in the returns
No compulsory assessment at the end of the each year Self-assessment / Deemed assessment concept is the major feature of the VAT Scrutiny is done in cases where a doubt arises of underreporting / evasion of tax System of cross checking Dealers are required to submit details of purchase and sales A cross checking computerized system between VAT vs Excise / Income tax
Correctness of self-assessment will be checked through a system of Departmental Audit Concept of Audit to be conducted by the Chartered Accountant / STP / Cost accountant has been introduced in the VAT regime in respect of specified dealer
Exempted 4% Around 50 commodities comprising of natural and unprocessed products in unorganized sector, items which have special importance Comprising of items of basic necessities, industrial inputs, capital goods, declared goods 12.5% Balance commodities are covered 1% Non-VAT goods 20% Bullion, precious stones etc Petrol, diesel, ATF, liquor etc are kept outside the VAT regime. However, States may impose tax at 20% on these goods Narcotics, molasses etc.
Coverage of goods under VAT Generally all goods are covered except few goods which are covered under the general sales tax law; Stock Transfer input tax is restricted to the extent of 2% Compensation for losses 100% in the first year, 75% in the second year and 50% in the third year Imports into the VAT chain presently State Government do not have power to impose tax.
Purchases Sale Local Inter-State Export Stock transfer Local - @ 12.5% IT 125/- IT 125/- IT 125/- 105 URD @ 12.5% Nil* Nil* IT 125/- Nil ** Inter-State Nil Nil Nil Nil Import Nil Nil Nil Nil If Mr. X ST 50%, input tax shall be restricted to 50% i.e., 500 * 12.5% = 62.5 * Purchase from URD input tax credit is available when output tax is payable on such goods. ** Tax payable on purchase
Other use(u/s 20) Self consumption Lost / destroyed Warranties / free samples Purchases Local- @ 12.5% Nil Nil Nil Inter-State @ Nil Nil Nil 4% Imports Nil Nil Nil
Sale Purchases Used in business Export Used exempted goods Sale after 6 mths Stock transfer after 6 mths Local- @ 12.5% 125/12* 12 125/- Nil 125/12* 6 125/12* 6 Inter- Nil Nil Nil Nil Nil State @ 4% Imports Nil Nil Nil Nil Nil -Ve goods Nil Nil Nil Nil Nil
Purchases Sale Local Inter-State Export St transfer Local @ 12.5% IT 125/- IT 125/- IT 125/- @ 10.5% IT 105/- URD @ 12.5% Nil * Nil * IT 125/- Nil* Inter-State / ST Nil Nil Nil Nil Import Nil Nil Nil Nil * Purchases from URD (other than fuel) input tax credit is available only when such goods are put use u/s 11(a)(8)
Purchases Sale Local Inter- State Export St transfer Composition dealer Nil Nil Nil Nil
Purchases Local @ 12.5% Sale Interstate/Im ports/stock transfer Taxable goods/ export Nontaxable goods Stock Transfer Rs. 300 sold in all scenario* IT 125 Nil @ 10.5% (600*125)/ IT 105/- 1200=62.5 Nil Nil Nil Nil * Taxable goods Rs. 300, Export Rs. 300, Non-taxable goods Rs. 300 & ST Rs. 300. Formula = (sale of taxable goods*non-id IT)/ total sales
Purchases Sale Taxable goods Local @ 12.5% 125/12* 12 URD 125/12* 12 -Ve goods/ Exempted under notification Interstate / Import / ST Export Non taxable goods Used in all kinds of scenario 125 Nil As per Formula 125 Nil Same as above Nil Nil Nil Nil Nil Nil Nil Nil