VAT registration, goes by various names like TIN (Tax Payer Identification number) and CST. Value-added tax registration or VAT in India is essential for any business structure that is involved in the selling of products. CST registration is mandatory if the gross revenue is above five lakhs; in some states ten lakhs. Before selling any product, it is advisable to learn about the VAT rates in a particular state as the State Government collects it.
No. The price of the goods the dealer sells and the tax charged are to be indicated on the bill separately. For example, a trader sells a TV at Rs.10, 000.00 and charges VAT @ 12.5%, he will indicate in the tax invoice the price of TV i.e. Rs.10, 000.00 and tax @12.5% i.e. Rs.1250.00. It will not be known to the buyer at what price the dealer has purchased the goods.
This is the VAT you charge your customer when you are a taxable person making taxable sales. A taxable person is an individual, Partnership, Corporation, etc. who is registered under VAT. Individuals who make taxable sales above the prescribed limit are required to register. When registered, VAT is chargeable on all the taxable sales undertaken. This tax on sales is your output tax.
The tax you pay on your purchases is input tax. Many of the things you buy will carry VAT charge, but if you are registered under VAT, you can usually claim credit for the VAT charges on most business purchases. It includes not only the VAT on your purchases of raw materials or goods purchased for resale but also the VAT on things like Capital goods, such as machinery or equipment for use in the business in most of the states.
In order to relieve some businesses of the need to keep detailed records, the law makes provision for a simpler method of accounting for VAT. The method of calculating how much VAT is due to be paid is also made easier. This method is the Composition scheme. According to composition scheme, a small amount of tax is to be paid in exchange of not maintaining books of account but in doing so, the input tax credit is lost.
VAT eliminates cascading effect by providing for set off for taxes paid on inputs and only taxing value addition.
A registered dealer can avail the benefit of input vat credit. Practically the dealer is neutral to VAT as what he charges to the customer is what he pays to the government with the benefit of input credit. He also gets recognition as a registered dealer bringing him creditability.
There are serious penal consequences for not taking VAT registration when you are required to. In addition, your purchaser would not be eligible for input VAT credit.
The State Government issues VAT Registration. Therefore, based on the State, the processing time for obtaining VAT Registration will differ. In general, VAT Registration can be obtained in 7 - 20 working days.
No. As the dealer has to maintain two simple set of books, Sales book and Purchase book. In Sales Book, he would record chronologically sales made and tax collected from the purchaser. In Purchase book, similarly, he will record purchases made and tax paid on such purchases.