VALUE ADDED TAX

VAT

  • Value added tax.
  • One of the types of sales tax system.
  • Simple, Easy with lesser tax rates.
  • It is calculated by deducting tax paid on purchases from tax payable on sales.

TAX RATES

  • 1% - Jewellery, Bullion, Gold & Silver articles.
  • 4% - Industrial inputs, Capital goods & other Consumable goods.
  • 12.5% - other items not specified above.

SPECIAL RATES

  • Alcohol, Sugarcane, Petroleum products etc.

REGISTRATION OF A DEALER

  • Firms, Manufacturing units, Hotels, Contractors – registration compulsory after reaching turnover of 5 lakhs.
  • Other traders - after reaching turnover of 10 lakhs.

For the following Dealers no turnover limit & should pay tax at their actual turnover. (Registration compulsory before
1 day of commencement of business)

  • Casual traders
  • Brokers
  • Outstate parties.
  • Consignment agent
  • Non-resident

REGISTRATION FEES

Principal place of business - Rs.500
Branch - Rs.50
No Security deposit needed.
Renewal not necessary.


(ITC- INPUT TAX CREDIT)

ASSESSMENT SYSTEM

Two methods

  • Input Tax Credit (ITC) method.
  • Compound rate method.

INPUT TAX CREDIT METHOD

CALCULATION OF VAT ( under ITC Method)
Total tax payable on sales : xxxx
less: Tax on sales returns : xxxx
OUTPUT TAX PAYABLE : XXXX

Total ITC available on purchases : xxxx
Less: ITC on purchase returns : xxxx
Less: Reversal of ITC : xxxx
ITC PAYABLE : XXXX

VAT PAYABLE: OUTPUT TAX PAYABLE less ITC PAID.

COMPOUND RATE METHOD

OPTION FOR FOLLOWING DEALERS ONLY
1. HOTELS & RESTAURANTS:

  • 10 to 25 lakhs - Rs. 12000
  • 25 to 30 lakhs - Rs. 24000
  • 30 to 40 lakhs - Rs. 36000
  • 40 to 50 lakhs - Rs. 48000

2. WORKS CONTRACT:

  • Civil Works Contract - 2%
  • Civil Works Maintenance - 2%
  • Other Contractors - 4%

3. SMALL TRADERS UPTO 50 LAKHS:

  • ½% of the total turnover

INPUT TAX

  • First schedule Part A - 1%
  • First schedule Part B - 4%.
  • Others - 12.5%

NO INPUT TAX CREDIT IN THE FOLLOWING CIRCUMSTANCES

  • Unregistered dealers.
  • No purchase bills.
  • Goods used for personal use.
  • Free gifts, samples.
  • Goods destroyed in transit.
  • Exempted goods.
  • Interstate purchases, consignment.

REVERSAL OF INPUT TAX CREDIT

  • Purchase Returns.
  • Unfructified Sales.
  • Bogus Bills, No Bills.
  • Free Samples, Personal Use
  • Raw Materials destroyed in Manufacturing
  • Taxable goods subsequently declared as exempted.
  • Interstate, Consignment and stock transfer of goods against declaration forms. (Calculated at assumed
    rate of 4%)
  • Sellers registration cancelled prior to date of sale

OUTPUT TAX

  • Sales against C - Form – 2%
  • Without C - form - Local Tax Rate (VAT)
  • F - Form - 0%
  • Without F - form - Local Tax Rate (VAT)

ZERO RATED SALES

  • Export sales.
  • Goods sold to SEZ.

ITC can be claimed as refund.

EXEMPTED SALES

  • Goods exempted.
  • Goods sold to certain institutions.

NO TAX ON PURCHASES, NO TAX ON SALES AND THEREFORE NO ITC.

ASSESSMENT PROCEDURE

  • Self assessment
  • 20% of the cases are randomly selected for assessment

PENALTIES

  • Return filed without payment of tax (or) delay in filing exceeding 10 days – 15% interest charged on tax
    (for a year)
  • Interest can be claimed from department on refund at ½ % in delay exceeding 90 days.

ITC ON CAPITAL GOODS

  • Capital goods Purchased within State -> Maximum ITC -> 4%
  • 1st Year - 50% of ITC can be adjusted
  • 2nd Year - 25% of ITC can be adjusted
  • 3rd Year - 25% of ITC can be adjusted
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