Value Added Tax

Presented By :

Anand Sham Chandak.

BackgroundTo remove problems in old tax structure

of -Cascading effectDouble taxation of commoditiesMultiplicity of taxes

• Entry No.54 in List II (state list) of Schedule VII of constitution of India , empowers state levy tax on sale or purchase of goods other than news papers

CONSTITUTIONAL PROVISIONS

AT PRESENTAll states have adopted VAT All states have adopted VAT It has replaced Local Intra State taxes levied It has replaced Local Intra State taxes levied at state level E.g.. Local Sales Tax, Turnover at state level E.g.. Local Sales Tax, Turnover Tax, Additional Taxes and Surcharge Tax, Additional Taxes and Surcharge Central Sales Tax (CST) governing inter-state Central Sales Tax (CST) governing inter-state sales continues to be operational, but its rate sales continues to be operational, but its rate is 2% w. e .f. 01.04.2010is 2% w. e .f. 01.04.2010

Applicable

to ALL

“GOODS”

ELECTRICITY YES 1.MOVABLE2.CAPABLE OF ABSTRACTION & CONSUMPTION

STANDING TREES OR GROWING CROPS

YES IF SEVERED FROM EARTH UNDER TERMS OF SALE THEN IT IS MOVABLE HENCE GOODS

CANNED SOFTWARES

YES The moment copies are made and marketed , software become “goods” which can be capable of abstraction, consumption , and which can be transferred, delivered, stored and possessed. Hence, even if software is intangible it is Goods

NEWS PAPERS NO They are not goods but bundles of old newspapers sold as scrap or raddi are not sold as ‘newspapers’ and therefore, they are goods liable to VAT

WEEKLIES,JOURNALS, MAGAZINES

NO Weeklies , journals , magazines are at par with newspapers. Therefore, they are not goods

RECEIVABLES NO Receivables like debtors, bills of exchange are actionable claims, which are specifically excluded from the ambit of ‘goods’

LOTTERY TICKETS

NO Lottery tickets represents right to participate in lottery and a chance to win therein. Hence, it is an actionable claims and not ‘goods’

SIM CARDS NO If the SIM card is incidental to the provision of services, VAT can not be imposed thereon

SALES Any Transfer of property in goods by one person to another for cash or deferred payment or any other valuable

consideration

TURNOVERMeans

aggregate of sales

price received or receivable by a dealer

Input Tax creditmeans setting-off the input tax paid by a registered dealer against the amount of output tax payable by

him

Only to a registered dealerOnly on intra-state purchases Central sales tax paid on inter state purchases is not allowed as input tax credit

Only if purchased from registered dealerSet off against : 1] VAT on intra-state sales2] CST on inter-state sales

LETS UNDERSTAND LOGIC BEHIND ALLOWING VAT CREDIT AGAINST PAYMENT OF CST AND ALLOWING

CREDIT OF CST

DEALER IN PUNESTATE OF MAHARASHTRA

DEALER IN BANGALORESTATE OF KARNATAKA

INTER STATE SALES TO STATE OF MAHARASHTRA

1.CST ON SALES IS COLLECTED BY STATE OF KARNATAKA2.NO CREDIT OF CST ON PURCHASES MADE BY DEALER OF BANGALORE ALLOWED TO THE DEALER OF PUNE3.DEALER IN BANGALORE CAN USE THE INPUT TAX CREDIT AGAINST PAYMENT OF CST OF INTER STATE SALES

Non Availability of Input tax credit for set off

Inter state purchasesStock Transfer : 2% disallowedInputs consumed for personal purposeInputs used for manufacture of exempted goods Inputs used for exported goods , if it is not refunded

Computation of VAT liability or Refund

• As explained in the excel sheet and print out given to you

After registration

procedure , every dealer shall

be allotted TIN no.

TIN (Taxpayer`s identification

number ) is a 11 digit

numerical code which is

intended to identify a tax

payerTIN will facilitate computer

applications, such as

detecting stop filers and

delinquent accounts.

TIN is required to be stated

on each invoice, hence , Tin

will help cross check

information on tax payer

compliance, for example , the

selective cross-checking of

sales and purchases among

VAT taxpayers

Registration procedure

• Application of registration is required to be made in

prescribed form along with prescribed security to the

commissioner or any other specified authority

Documents to be attached :Address proof 1. Place of business 2. Place of residenceNon refundable Fees 1. Voluntary Reg. : Rs 5000 2. Mandatory Reg.: Rs 500Deposit of Rs 25000 only in case of voluntary registrationConstitution of business e.g. Partnership deed, Articles & Memorandum of AssociationShop Act numberProfession Tax numberPhotos (2)Bank Account details along with a cancelled chequePAN CARD.

Sample image

of RegistrationCertificate

Audit of a Sale invoice

Points to be checked : “Tax Invoice” Date Name of the Customer with

address of delivery Particulars Separate disclosure of VAT rates

and Amount Issuing dealer`s VAT TIN No. and

declaration Authorised Signatory

Applicability of VAT rates

SCHEDULE A : EXEMPTED GOODS

SCHEDULE B : Goods with 1% VAT rate

SCHEDULE C : Goods with 4% VAT rate

SCHEDULE D : Goods with 20% VAT rate

SCHEDULE E : Goods with 12.5% VAT rate

Audit of a Purchase invoice

Points to be checked : “Tax Invoice” Date Name of the Supplier

with address of issuance Particulars Separate disclosure of

VAT rates and Amount Issuing dealer`s VAT TIN

No. and declaration Authorised Signatory

Date of Payment and return submission

• Under M-VAT the payment is needed to be made before 21st of the following month of the respective month/quarter/six months.

• The return has also to be furnished within 30 days of the following month/quarter/six months in e-form.

• The return are furnished in form no. 231/232/233/234/235 as per the registration of dealer.

• In case of late payment, simple interest of 1.25% per month is payable on outstanding amount.

Explanations of

E-forms

• Form No 231• Form for CST : Form No

III E• Form for C form

application• Form No 704 for VAT

Audit

STATISTICS

NAME OF ACT NO. OF REGISTERED

DEALERSMVAT ACT 708167CST ACT 549404LUXURY TAX ACT 4195ENTRY TAX ACT 817PTEC 1961295PTRC 255778SUGARCANE P.T. ACT 397

Current progress in VATCurrent progress in VATWhole VAT department is electronisedVAT Audit limit is increased to Rs. 60 LacsVAT Audit can done by CWA and CAPenalty for not filing VAT audit report in form No.704 is 1% total turn overFirst time penalty is introduced for incorrect filing of particulars in VAT audit reportWorks contract and related TDS issues [ 2% if registered dealer and 4% if non registered dealer ]Concept of wine and liqueur is separated