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(Notification No.18/2011- S.T., dated 1-3-2011 as amended) In excercise of the powers conferred under clause (a) and clause (hhh) of sub-section (2) of the section 94 of the Finance Act,1994, the central Government hereby makes the following rules for the purpose of collection of service tax and determination of rate of service tax namely:-
RULE 1 . SHORT TITLE AND COMMENCEMENT 1. These rules shall be called the Point of Taxation Rules, 2011. 2. They shall come into force on the 1st day of April, 2011.
(a)taxable service means a service which is subjected to service tax, whether or not the same is fully exempt by the Central Government under Section 93 of the Act; 3
Explanation - For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of 4 receipt of each such advance.
Iii.where the payment is also received before the (change in effective rate of tax), but the invoice for the same has been issued after the 5 (change in effective rate of tax), the point of taxation shall be date of
Iii.where the payment is also received before the (change in effective rate of tax), but the invoice for the same has been issued after the 6 (change in effective rate of tax), the point of taxation shall be date of
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Import of goods - Customs Duty (Basic Duty + CVD) Manufacture of goods - Excise Duty Sale of goods - Sales Tax Entry of goods in the State / Territorial Limit - Entry Tax / Octroi
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system suffered from all the weaknesses of Cascading, uncontrolled incidence, Multiplicity of rates etc.
With the deficiencies in the existing tax system, the Government of India (GOI) took the initiative to replace this system with subnational VAT. GOI as a facilitator.
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CST Act, 1956 to govern principles of taxation of such sales. The tax, however, has been assigned to the states The tax is levied on the basis of origin when goods are sold to another states. For interstates sales while the dealers make use of C form, govt. deptt. uses D form for availing same benefits.
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Background
What
VAT is a tax on sale or purchase of goods levied at every stage from manufacture or first sale in chain of distribution till the retailer, with a provision to deduct tax paid or payable on purchase from tax payable on sale.
Brief
History
VAT was first introduced in France in 1954 50 Countries switched over to VAT during last decade Over 130 countries worldwide have introduced VAT over the past three decades
Indian VAT
Implemented in all states in a phased manner
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Evolution of VAT
The first preliminary discussion on State-level VAT took place in a meeting of Chief Ministers convened by Dr. Manmohan Singh, the then Union Finance Minister in 1995. - Basic issues on VAT Second State Finance Ministers Committee met in 1998
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Evolution of VAT Meeting of all Chief Ministers, convened on November 16, 1999 by Shri Yashwant Sinha, the then Union Finance Minister
First, before the introduction of State-level VAT, the unhealthy sales tax rate war among the States would have to end and sales tax rates would need to be harmonized by implementing uniform floor rates of sales tax for different categories of commodities with effect from January 1, 2000. Second, in the interest again of harmonisation of incidence of sales tax, the sales-tax-related industrial incentive schemes would also have to be discontinued with effect from January 1, 2000. Third, on the basis of achievement of the first two objectives, steps would be taken by the States for introduction of State-level VAT after adequate preparation. Formation of Empowered Committee of State Finance Ministers under the chairmanship of Dr. Asim Dasgupta.
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Evolution of VAT
Conducting of several rounds of meeting attended by State Finance Ministers, Finance Secretaries and the Commissioners of Commercial Taxes of the State Governments and also MOF officials. Steps have also been taken for necessary training, computerisation and interaction with trade and industry, particularly at the State levels. Interaction with trade and industry is being specially emphasised.
April 1, 2003 April 1, 2005 May 1, 2005 Oct 1, 2005 Jan 1, 2006 April 1, 2006 Jan 1, 2007 -Jan 1, 2008.
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VAT 100.00 4.00 104.00 150.00 6.00 156.00 2.00 50.00 VAT 150.00 6.00 156.00 200.00 8.00 208.00 2.00 50.00
TNGST 100.00 4.00 104.00 150.00 6.00 156.00 6.00 46.00 TNGST 150.00 6.00 156.00 200.00 8.00 208.00 8.00 44.00
Retailer
Consumer
Process of Reforms
ground work for VAT. of Central and State VAT- A Dual VAT
Introduction
system.
Integration Reforms Reforms
of service tax.
VAT / GST
VAT
VAT
VAT
Taxes abolished
Entry Tax
Already imposed by States - to be made Vatable Entry tax in lieu of Octroi - not Vatable
No VAT for a year on items presently attracting AED (sugar, textile and tobacco)
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Three rate categories. 0, 4, 12.5%. Exceptions of 1 and 20%. Petroleum not included. No new incentives. Composition scheme for small dealers.
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Uniformity in Rates
Exempt Rate - 0%
46 commodities consisting of
natural and unprocessed products; Items legally barred from taxation; and items having social implications
Special Rate - 1%
Forms under State Sales Tax laws for concessional rate of tax to be abolished Composition Scheme
Covers dealers having turnover between Rs. 5 Lakhs to Rs. 50 Lakhs Composite rate not specified
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VAT can be computed by using either of the three methods detailed below: The Subtraction method:- The tax rate is applied to the difference between the value of output and the cost of input. The Addition method: The value added is computed by adding all the payments that is payable to the factors of production (viz., wages, salaries, interest payments etc). Tax credit method: This entails set-off of the tax paid on inputs from tax collected on sales
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Incentives
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Accrual
Application
VAT paid on inputs VAT paid on Capital Goods Sales Tax paid on Goods lying in stock Entry Tax (not in lieu of Octroi)
VAT payable on Finished Goods CST payable on Inter State Sales Refund in case of exports
Input Tax Credit = (A+B) (C+D) Where A = ITC c/f from previous month / year B = ITC accrued during the month / year C = ITC reversed during the month / year D = ITC refunded during the month / year
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Inputs used in the manufacture of exempted goods Purchases for other than manufacture/re-sale Purchases made inter State/in-transit Purchases of goods of negative list
Delhi - Fuel in the form of Petrol, Diesel and Kerosene, LPG, CNG, Coal AP - Fuel, Coal and Natural Gas used for power generation Jharkhand - Consumables Tripura Credit available in excess of 4% on petroleum products (other than petrol, ATF and diesel) and other fuels
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VAT Credit will be refunded within three months in case of exports Unutilised Credit will be carried over till the end of the succeeding financial year and if it remains unutilised will be refunded. Units in SEZ and EOU have an option of either
Not paying VAT on inputs; or Claim full refund within three months
Input tax credit shall be claimed only on the basis of original purchase invoice issued by registered selling dealer.
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In other words, the final exporter should be in possession of export order from foreign buyer and should take delivery of goods from the supplier making penultimate sale solely for execution of such export order and export the same goods. PURCHASE PRIOR TO PENULTIMATE SALE NOT EXEMPT - It may be noted that only penultimate sale is exempt but purchases earlier to penultimate sale are not exempt and purchase tax is payable if prescribed.
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Definitions - TNVAT
Input means any goods including capital goods purchased by a dealer in the course of his business.
Input tax means the tax paid or payable under this Act by a registered dealer to another registered dealer on the purchase of goods including capital goods in the course of business.
Output tax means tax payable under this Act by any registered dealer in respect of sale of any goods Taxable goods means goods other than exempted goods specified in the schedule to this act or goods exempted by notification by the government. Sale, dealer and goods found in the VAT Act, are similar to the definitions found in the Sales Tax Act.
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Exempted sale:
Sale of goods specified in the schedule or the goods exempted by notification by the government by any dealer shall be exemption from tax. Significant difference between Zero Rated Sale and Exempted Sale
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Registration Requirements
Dealers whose Total Turnover in respect of Purchase and Sale within the State is not less than Rs. 10 Lakhs Any other dealers whose Total Turnover is not less than Rs.5 Lakhs The following dealers irrespective of the quantum of Turnover in such goods shall get themselves registered: Casual trader; Dealer in bullion, gold, silver and platinum jewellery;
Dealer registered under sub-section (3) of Section 7 of the Central Sales Tax Act, 1956;
Dealer residing outside the State, but carrying on business in the State; Agent of a Non-Resident dealer; Dealer who exports or imports goods
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Tax Invoice
Tax invoice is popularly known as bill which will contain details of sale such as name and address of the purchaser with his TIN number,quantity of goods sold, its value etc and tax charged. This invoice /bill is to be issued in duplicate the original for purchaser and duplicate to be retained by the selling dealer. A registered dealer can claim input tax credit on his purchases, if he holds a valid tax invoice /bill at the time of furnishing his return to assessing authority.
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1 9 4 8 2 0 1 7 0 6 4
State Code Charge Code Number Proper Check Digits
VAT=0
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SST=1
CST=2
Return
Returns are to be filed monthly/quarterly as specified in the State Acts/Rules, and will be accompanied with payment challans. Every return furnished by dealers will be scrutinised expeditiously within prescribed time limit from the date of filing the return. If any technical mistake is detected on scrutiny, the dealer will be required to pay the deficit appropriately.
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Audit
Correctness of self-assessment will be checked through a system of Departmental Audit. A certain percentage of the dealers will be taken up for audit every year on a scientific basis. If, however, evasion is detected on audit, the concerned dealer may be taken up for audit for previous periods. This Audit Wing will remain delinked from tax collection wing to remove any bias.
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Record Maintenance
In hard copy or electronic form, in English or other languages
Purchase Account
Sales or Stock Transfer Account Production cum Stock Account for Manufacturers Debit Note and Credit Note
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Dr.
Cr.
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Cr.
The balance in VAT Credit Receivable (Input) Account at the end of the year to be shown in the Asset Side of the Balance Sheet under the head Loans and Advances
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The Guidance note under paragraph 32 clarifies the accounting treatment for inventories to be valued net of input tax. However, in case of inputs obtained from dealers who are exempt from VAT , unregistered dealers etc. where input tax credit is not available should be valued at the actual cost inclusive of the input tax.
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Purchase Account VAT Credit Receivable (Capital goods) A/c - Current year entitlement VAT Credit Deferred (Capital goods) A/c
Dr. Dr.
Dr.
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The capital goods including components, accessories, tools etc., should be valued net of VAT vide Guidance Note paragraph 36.
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VAT Payable Account VAT Credit Receivable (Input ) A/c VAT Credit (Capital goods) A/c To Cash / Bank A/c
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The Andhra Pradesh VAT laws do not contain the direct requirement of VAT audit. However, it has given power to the Commissioner to formulate procedure in this respect.
The Maharashtra VAT laws have prescribed for audit by a Chartered Accountant for dealers having turnover exceeding Rs.40 Lakhs. The Delhi VAT Act, 2004 has the provision of Audit for the dealers having turnover exceeding Rs.40 Lakhs.
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CenVAT at the Central level and StateVAT at the state level. CenVAT up to manufacturing level. StateVAT up to retail. CST already on way to phase out.
Both the tiers have autonomy in tax rates and base but the states have decided to follow uniformity on their own through the Empowered Committee. No compulsions. Own choice.
No incentives to be granted by any state. The old continue.
The task force headed by Dr.Vijay Kelkar had recommended for a comprehensive goods and services tax, which is followed by countries such as Singapore, Canada etc.
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There is a single national law on VAT There is no excise and other duties.There is just a single VAT rate VAT covers imports, the tax is rebated as goods move in value chain In most systems like European Union, Countries allow credit for tax paid on inter-state transactions Exemptions under VAT are the exception rather than the rule Countries and States use accountingbased controls.
There are as many legislations as states Excise will continue as may be other levies like entry tax There will be no VAT on imports
There are many exemptions Physical controls like border check-posts will continue.
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THANK YOU
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