Value Added Tax or VAT is an indirect tax, which is imposed on goods and services at each stage of production, starting from raw materials to final product. VAT is levied on the value additions at different stages of production.
VAT is different from sales tax in various aspects. While sales tax is to be paid on the total value of the goods and services, VAT is levied on every exchange of the product, so that consumers do not have to carry the total cost of tax. However, VAT is generally not applied on export goods to avoid double taxation on the final product. However, if VAT is charged on export goods, the tax amount is usually refunded to the taxpayer.
Value added tax can also be recovered. The individual consumers cannot recover VAT on purchases made by them. However, businesses can recover VAT on the services and materials, which are bought by them in order to continue the supply of the products and services.
Who are dealers under VAT?
A dealer is a person who purchases, sells, supplies or distributes the goods in the course of his business for valuable consideration. The VAT Act includes:
1. Local authority, Company, HUF, Association of persons, Firm
2. Casual trader, factor, commission agent, delcredere agent, auctioneer, local branch of the firm or company situated outside the State
3. Person who effects transfer of property in goods other than by way of sale
4. Dealer in hire purchase, works contract, person who transfers right to use the goods
5. Dealer in eatables including food and drinks (ie., hotels, restaurants and sweet stalls).
6. Port Trust, Railway Administration, Shipping, Transport and Construction Companies, Air Transport Corporation and Airlines.
7. Any person holding permit for transport vehicles
8. Tamil Nadu State Road Transport Corporation
9. Customs Department, Insurance Company, Advertising Agencies
10. Corporation or Companies of State and Central Governments
Who are liable for Registration?
1. Those dealers whose total turnover in respect of purchase and sales in the State is not less than Rs.10 lakhs for a year are to get registered under the Act.
2. The other dealers whose total turnover for a year is not less than Rs.5 lakhs shall get registered.
3. Casual Traders, agent of non-resident dealer and dealers in jewellery irrespective of quantum of turnover shall obtain registration.
4. Those dealers who intend to commence the business, on option, may obtain registration.
Registration fee:
The registration fee is Rs.500/- for principal place of business and Rs.50/- for each additional place of business. (Branches, Godowns). No Security Deposit is necessary for Registration, for dealers. There is no renewal of registration under VAT and it is permanent till it is cancelled by the Department or on
stoppage of business when reported by the dealer. No security deposit is necessary for Registration.
How to apply for registration:
On Introduction of VAT, a new dealer shall file an application in the specified Form along with fee as detailed above to the registering authority in whose Jurisdiction, his principal place of business is situated with a sufficiently Stamped self addressed enveloped, with necessary documents required in the Application form.
How the returns are to be filed?
Every dealer who is liable to pay tax under this Act shall file return on or before 20th of the succeeding month to Assessing authority in whose jurisdiction the principal place of business is located along with statement of purchases and sales effected by him during the month in the Form specified in Rules.
Every dealer whose taxable turnover in the preceding year is Two hundred crores of rupees and above shall file return on or before 12th of succeeding month along with statement of purchases and sales effected by him during the month.
The returns shall be filed either electronically or by ICR forms. The returns so filed shall be accompanied with proof of payment.
The category of dealers to file returns either electronically or by ICR forms may be notified by the Commissioner as per VAT rules.
Method of calculation of determining the tax liability under the present Sales Tax system different from this method:
In the present Sales tax system, tax liability of a dealer for a particular period is determined using the multiplication method i.e. The taxable turnover of a dealer for a particular period is multiplied by the rate of tax applicable to that turnover. In VAT, the method adopted is Input Tax Credit method as stated above. This is the only difference between the present Sales Tax system and the VAT.
Rates of tax under VAT:
The rates are 1%, 4% and 12.5% on goods eligible for input tax credit
TIN Definition:
The registration number allotted to the dealers is popularly known as TIN i.e. Taxpayer Identification Number. This is a eleven digit number to be quoted in all VAT transactions and correspondence. (or)
The Tax Payer’s Identification Number (TIN) is new unique registration number that is used for identification of dealers registered under VAT. It consists of 11 digit numerals and will be unique throughout the country. First two characters will represent the State Code as used by the Union Ministry of Home Affairs. The set-up of the next nine characters may, however, be different in different States.
TIN is being used for identification of dealers in the same way like PAN is used for identification of assesses under Income Tax Act. All the dealers seeking for new registration under VAT or Central Sales Tax will be allotted new TIN as registration number, however every State Commercial Tax Department have made provisions to issue new TIN to their existing dealers replacing old registration/ CST number
