1. Value Added Tax
Presented By :
Anand Sham Chandak.

2. Background
Concepts
Certain Definitions
Procedures for
registration
VAT Audit
Current progress
Queries time

4. To remove problems in old tax structure of - Cascading effect
Background
To remove problems in old tax structure of -
Cascading effect
Double taxation of commodities
Multiplicity of taxes

5. CONSTITUTIONAL PROVISIONS
Article 265 : Constitutional Authority
Article 245 : Powers of parliament and state
Article 246: Schedule VII
LIST I :
UNION LIST
LIST II :
STATE LIST
ENTRY NO.54
LIST III :
CONCURRENT LIST
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

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

7. Applicable to ALL “GOODS”
VAT Rates 0% 1% 4%
12.5%
20%

8. Includes all material, commodities and articles
WHAT IS “GOODS”?
Constitution of India
Includes all material, commodities and articles
Sale of Goods Act,1930
Means every kind of movable property
Other than actionable claims and money
Includes stock and shares ,growing crops ,grass, and things attached or forming part of land
CENTRAL SALES TAX ACT, 1956
Includes all materials, articles commodities and all kinds of movable properties
Does not include : newspapers, actionable claims, stock, shares and securities

9. STANDING TREES OR GROWING CROPS WEEKLIES,JOURNALS, MAGAZINES
ELECTRICITY
YES
1.MOVABLE
2.CAPABLE OF ABSTRACTION & CONSUMPTION
STANDING TREES OR GROWING CROPS
IF SEVERED FROM EARTH UNDER TERMS OF SALE THEN IT IS MOVABLE HENCE GOODS
CANNED SOFTWARES
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
Weeklies , journals , magazines are at par with newspapers. Therefore, they are not goods
RECEIVABLES
Receivables like debtors, bills of exchange are actionable claims, which are specifically excluded from the ambit of ‘goods’
LOTTERY TICKETS
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
If the SIM card is incidental to the provision of services, VAT can not be imposed thereon

10. SALES Any Transfer of property in goods by one person to another for cash or deferred payment or any other valuable consideration
Includes
Works contract
Lease transactions
Hire purchases
Supply of goods by unincorporated AOP or BOI to its members
Supply of foods or drink for human consumption
Excludes
Mortgage/pledge/hypothecation of goods
Gift
Barter/ exchange
Branch transfer

11. Means aggregate of sales price received or receivable by a dealer
TURNOVER
Means aggregate of sales price received or receivable by a dealer

12. Input Tax credit means setting-off the input tax paid by a registered dealer against the amount of output tax payable by him
Only to a registered dealer
Only on intra-state purchases Central sales tax paid on inter state purchases is not allowed as input tax credit
Only if purchased from registered dealer
Set off against : ] VAT on intra-state sales
2] CST on inter-state sales

13. INTER STATE SALES TO STATE OF MAHARASHTRA
LETS UNDERSTAND LOGIC BEHIND ALLOWING VAT CREDIT AGAINST PAYMENT OF CST AND ALLOWING CREDIT OF CST
INTER STATE SALES TO STATE OF MAHARASHTRA
1.CST ON SALES IS COLLECTED BY STATE OF KARNATAKA
2.NO CREDIT OF CST ON PURCHASES MADE BY DEALER OF BANGALORE ALLOWED TO THE DEALER OF PUNE
3.DEALER IN BANGALORE CAN USE THE INPUT TAX CREDIT AGAINST PAYMENT OF CST OF INTER STATE SALES
DEALER IN BANGALORE
STATE OF KARNATAKA
DEALER IN PUNE
STATE OF MAHARASHTRA

14. Non Availability of Input tax credit for set off
Inter state purchases
Stock Transfer : 2% disallowed
Inputs consumed for personal purpose
Inputs used for manufacture of exempted goods
Inputs used for exported goods , if it is not refunded

15. NO CREDIT shall be taken of
Registered dealer purchases raw material & capital goods from another registered dealer
The purchase price would include VAT on raw material and capital goods
Dealer shall take credit of VAT paid on raw material and capital goods purchased within the state
Debit to “Input Tax credit A\c”
Take credit on the basis of VAT invoice
NO CREDIT shall be taken of
CST on inter state sale purchases
Customs duty, excise duty, service tax, octroi etc
Dealer would liable to pay VAT on intra-state sale of goods
VAT on such sales would be paid by utilising Input Tax credit and balance shall be paid in cash
VAT PAYABLE = VAT ON SALES - VAT ON PURCHASES
Procedures for taking VAT credit , utilisation of credit taken, payment of VAT etc, are governed by the procedures , restrictions and conditions , which differ from state to state

16. Computation of VAT liability or Refund
Addition method Value Added = Factor Payment + Profit
Invoice method VAT payable = VAT on sales – VAT on purchases
Subtraction method Value Added = Sales-purchases
As explained in the excel sheet and print out given to you

17. REGISTRATION OF M-VAT Obligatory registration Voluntary Registration
If the turn over of the dealer exceeds Rs.5 lacs
Voluntary Registration
If the turn over of the dealer does not exceeds Rs.5 lacs
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 payer
TIN 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

18. Registration procedure
Documents to be attached :
Address proof Place of business Place of residence
Non refundable Fees Voluntary Reg. : Rs Mandatory Reg.: Rs 500
Deposit of Rs only in case of voluntary registration
Constitution of business e.g. Partnership deed, Articles & Memorandum of Association
Shop Act number
Profession Tax number
Photos (2)
Bank Account details along with a cancelled cheque
PAN CARD.
Application of registration is required to be made in prescribed form along with prescribed security to the commissioner or any other specified authority

19. Sample image of Registration Certificate

20. 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

21. 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

22. 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

23. 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.

24. 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

25. STATISTICS 708167 549404 4195 817 1961295 255778 397 DEALERS MVAT ACT
NAME OF ACT
NO. OF REGISTERED
DEALERS
MVAT ACT
708167
CST ACT
549404
LUXURY TAX ACT
4195
ENTRY TAX ACT
817
PTEC
PTRC
255778
SUGARCANE P.T. ACT
397

26. Current progress in VAT
Whole VAT department is electronised
VAT Audit limit is increased to Rs. 60 Lacs
VAT Audit can done by CWA and CA
Penalty for not filing VAT audit report in form No.704 is 1% total turn over
First time penalty is introduced for incorrect filing of particulars in VAT audit report
Works contract and related TDS issues [ 2% if registered dealer and 4% if non registered dealer ]
Concept of wine and liqueur is separated