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About VAT

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The essence of VAT is in providing set-off for the tax paid earlier, and this is given effect through the concept of input tax credit/rebate. This input tax credit in relation to any period means setting off the amount of input tax by a registered dealer against the amount of his output tax. The Value Added Tax (VAT) is based on the value addition to the goods, and the related VAT liability of the dealer is calculated by deducting input tax credit from tax collected on sales during the payment period (say a month).

In the existing sales tax structure, there are problems of double taxation of commodities and multiplicity of taxes, resulting in a cascading tax burden. For instance, in the existing structure, before a commodity is produced, inputs are first taxed, and then after the commodity is produced with input tax load output is taxed again. This causes an unfair double taxation with cascading effect. In the VAT, a set-off given for input tax as well as tax paid on previous purchases. In the prevailing sales tax structure, there is in several states also a multiplicity of taxes, such as turnover tax, surcharge on sales tax, additional surcharge etc. With introduction of VAT, these other taxes will be abolished. In addition, Central Sales Tax is also going to be phased out. As a result, overall tax burden will be rationalised, and prices in general will fall. Moreover VAT will replace the existing system of inspection by a system of built-in self-assessment by the dealers and auditing. The tax structure will become more simple and transparent. That will improve tax compliance and also augment revenue growth.

 

A full-fledged Vat was initiated first in Brazil in mid 1960’s and then in European countries in 1970’s and subsequently introduced in about 130 countries, including several federal countries. In Asia it has been introduced by a large number of countries from China to SriLanka. Even in India there has been a VAT system introduced by the Government of India for about last 10 years in respect of Central Excise Duties. At the state level, the VAT system as decided by the State Governments, would now be introduced in terms of Entry 54 of the State List of the Constitution.

MAINTENANCE AND PRESERVATION OF ACCOUNTS:


1.
Every person registered under the Act, every dealer liable to get himself registered under the Act and every other dealer who is so required by an assessing authorities, shall keep and maintain the following books of accounts disclosing true and complete accounts of his daily transactions in Malayalam or in English together with the vouchers and bills.

 

A daily cash book, that is to say, a record of all cash receipts and payments, kept and maintained from day to day indicating the cash balance in hand at the end of each day.

 

A journal, if the accounts are maintained according to mercantile system of accounting.

 

A ledger

A purchase register showing date wise details of the person from whom goods are purchased indicating the registration number, if the purchase is from a registered dealer, details of goods, quantity and value of goods purchased, freight, delivery charges or cost of installation which are separately charged, other charges, if any, paid, and input tax for such purchases.

 

A sales register showing date wise details of the sales effected to registered indicating the registration number of the purchasing dealer, quantity and value of each class of goods sold, freight, delivery charges or cost of installation which are separately charged, other charges, if any, received, and output tax for such sales.


A stock register showing date wise details of in-out- balance position of goods indicating opening stock, goods purchased, goods received otherwise than by way of purchase, goods received on stock transfer, goods sold or used for manufacturing, goods disposed of otherwise than by way of sale or manufacturing, consignment or stock transfer, goods bought or sold in the course of inter-state trade or commerce or in the course of export out of or import in to the territory of India, and the closing stock.


2.
Every dealer shall keep separate purchase and sales accounts for different goods liable to tax at different rates of tax.

 

3. Every dealer liable to pay turnover tax shall maintain separate accounts for the goods liable to turnover tax.

 

4. Every dealer shall keep separate accounts in respect of sales or purchases in the course of export or import and in respect of inter-state sales or purchases.

5. Every commission agent, broker, del credere agent, auctioneer or any other mercantile agent shall maintain accounts showing:

    • Particulars of authorization received by him to purchase or sell goods on behalf of each principal separately and the date on which a copy of such authorization in each case was sent to the assessing authority.

    • Particulars of goods purchased, or of goods received for sale on behalf of each principal each day.
    • Details of purchases or sales effected on behalf of each principal each day.
    • Details of accounts furnished to each principal each day.
    • The tax paid on purchases or on sales effected on behalf of each principal and the Chalan No: and date of remittance of the tax in to treasury.

6. Every wholesale dealer, importer and manufacturer shall maintain day-to-day stock accounts of each class of goods dealt in by him. The stock account shall contain particulars of purchases or receipts, sales or deliveries and balance stock.


7.
Every dealer liable to pay tax under the Act, other than a dealer paying presumptive tax under Sub-section (5) of S (6) or compounded tax under section 8,shall maintain a VAT account showing month wise details of input tax, output tax, purchase tax, Central Sales Tax, Entry tax, reverse tax, tax due, tax paid and input tax, if any, carried forward to the subsequent return period together with credit and debit notes issued in Form No…

8. Every dealer shall issue a bill or an invoice or cash memorandum in respect of every sale and where the sale is subject to approval by the purchaser, such dealer shall issue bill or an invoice or cash memorandum specifying therein that the sale be subject to approval within a stated period of time.

 

9. Every such bill or invoice or cash memorandum shall be prepared in duplicate unless a different procedure is prescribed by the Central Excise law as applicable to such dealer, and shall be serially machine numbered. One copy of it shall be issued to the purchaser, in the case of the sale bill and to the seller in the case of purchase bill, and the dealer shall retain the other copy. The serial numbers assigned to the bills, invoice or cash memoranda shall start from serial No.1 for any year and shall run consecutively for the whole year. Separate series of bills invoice, or cash memoranda shall be maintained for the sale of goods specified in different schedules with the alphabets A, B, C & D respectively prefixed to each series, for schedules One to Four, E for goods not falling under any of the four schedules, and F for transfer of right use of any goods. The dealer shall intimate the series and the opening numbers of bills, invoices or cash memoranda intended to be used by him in a year to the assessing authority during the month of April and the number of the first and last bills, invoices or cash memoranda issued during the month, quarter or year, shall be noted in the monthly, quarterly or annual return filed by the dealer.


10.
Every manufacturer of goods shall maintain daily production accounts showing quantitative details of the various raw materials used for the manufacture and the quantitative details of the goods so manufactured.


11.
Every manufacturer in Jewellery of Gold, Silver and Platinum group of metals shall maintain a manufacturing account.


12.
Every dealer who is required to maintain stock accounts shall maintain subsidiary accounts for each godown if there is more than one godown for keeping his stock.

13. Where the accounts or records are maintained by means of computer or any other electronic device, the dealer shall keep a print out of such accounts or records on daily basis.


14.
Accounts and other records maintained by a dealer shall be preserved by them for a period of five years from the expiry of the year to which the assessment relates or from the date of disposal of the appeal or revision arising out of such assessment or from the date of completion of any other proceeding under the Act connected with such assessment or appeal or revision whichever is later and shall be kept at the place of business mentioned in the certificate of registration. Every dealer who maintains accounts by electronic means shall intimate the concerned assessing authority in advance along with the password. Such dealer shall also retain them in the electronically readable format for the retention period specified in this sub-rule.


2. CREDIT NOTES AND DEBIT NOTES:

 

The credit note and debit note specified in section 41 shall bear separate consecutive serial numbers and shall contain the following details.

 

  • Nature of the document (Whether debit note/credit note)
  • Date of issue
  • Name and address of the selling dealer (With registration number)
  • Name and address of the buying dealer (With registration number)
  • Number and date of the invoice in relation to which the credit note or debit not is issued
  • Amount credited or debited
  • Tax due on the amount credited or debited

 


 
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