history of vat

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A PROJECT REPORT

ON

ANALYSIS OF TAX

PROJECT WORK SUBMITTED IN PARTIAL

FULFILLMENT OF THE REQUIREMENTS

FOR THE AWARD OF THE DEGREE OF

MASTER OF MANAGEMENT STUDIESIN

FINANCE

SUBMITTED BY

NAME: HEMANGI PRAMOD KHILARE

UNDER THE GUIDANCE OF: PROF.ARUNA SONAWANE

AlamuriRatnamala

Institute of Engineering & Technology

Affiliated toUNIVERSITY OF MUMBAI

Department of [Branch] Management

Academic Year 20132014


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DEPARTMENT OF MANAGEMENT

CERTIFICATE

This is to certify that the dissertation/project entitled

______________________________ submitted by Mr. /Ms.

___________________ bearing Pin No._______________ on this ___

Day of______ 20__ in partial fulfillment of the requirements for theaward

Of the Degree of Master of Management Studies of University Mumbai,is

Abonafide work to the best of my/our knowledge and may be placed

Before the Examination Board for their consideration.

_____________________ ____________________Mr. / Mrs. _______________ Mr. / Mrs. _______________

Internal Exam iner External Examiner

______________________ _________________Mr.NishantKaushik______________

_ Mr. _______________

Dean-Academics Director


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Certificate of Undertaking

I, Hemangi Pramod Khilare hereby declare that project entitled Project

Title Undertaken at AlamuriRatnamala Institute of Engineering and

Technology by Hemangi P. Khilare Seat No. 1023in partial fulfillment of

MMS (Management) degree (Semester III) Examination, is my original

Work and the Project has nor formed the basis for the award of anyDegree, associate ship, fellowship or any other similar titles, either in

Mumbai University or any other University of India.

(Signature of the Student)

NAME OF THE STUDENT


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ACKNOWLEDGEMENT

I express my sincere thanks to my project guide of prof. Aruna

Sonawane

Coordinator at ARMIET College for M.M.S section who has

been guiding

Force to my project on ANALYSIS OF TAX

I am also thankful to my all professors to their Support and

encouragement in finding out the appropriate data for this

Project report, without their thankless support and efforts,

making this support would have been impossible for me.

I would also thanks the whole respondent who Provide me

the best knowledge and for their help and cooperation

throughout the project.


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INDEX

Sr.no.

Content Pageno.

1. History Of VAT2. Necessity And Implementing Method

3. Benefits Of VAT

4. Slab Rates

5. Business Liable For Vat And How Is It Charged

6. Procedures Of VAT7. Obligation For Registration

8. Criticism

9. Variants Of VAT

10. Tax Exemption Of VAT System11. Different Goods And Services And Their Vat Rate

12. VAT Invoice

13. Rates Of Taxes

14. Merits And Demerits Of VAT15. Vat In Indian Context

16. Central Value Added Tax

17. Role Of Chartered Accountant Of VAT

18. Audit

19. Methods Of Computation Of VAT20. Icais Role Of VAT

21. Tax-Payers Identification Number

22. Bank Reconciliation23. Procedure Of E-Filling Of TDS

24. Challan Correction Mechanism

25. New Procedure Of Challan Correction By Bank

26. NSDL E-TDS/TCS Return Preparation Utility (Rpu)

27. E-Return Intermediary

28. Income Tax Return29. ITR Forms

30. TDS - Procedure For Deduction/Challan/Return/Certificates

31. What Is Customer Identification Number

32. Paper Filling

33. E-Payment Of Taxes

34. Assessment

35. Penal Provision

36. Authorized Signatories To The Return Of Income

37. Role Of Accounting Profession Evolving


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History of VAT

The Value Added Tax system was first introduced by Von Siemens in1951.Ever since 1954, when the tax on value added was introduced in

France it has spread to a large number of countries. This tax wasproposed for the first time by Dr. Wilhelm von Siemens for Germany in1919as improve turnover tax in 1921, VAT was suggested by ProfessorThomas s. Adams for the United States of America who recommendedsales tax with credit refund for taxes paid by the producer or dealer (aspurchaser) on goods bought for resale or for necessary use in theproduction of goods for sales.

VAT was also recommended by the shoup mission for the reconstruction

of the Japanese economy in 1949. However the tax was not introducedby any country till 1953. France led the way in 1954 by adopting a VATthat covered the industrial sector alone and the tax was limited up to thewholesale level. The tax was limited to the boundaries of France until thefifties.

VAT has however been spreading rapidly since the sixties. The IvoryCoast followed France by adopting VAT in 1960. The tax was introducedSenegal in 1961 and by Brazil and Denmark in 1967. The tax gathered

further momentum as it was made a standard form of sales tax requiredfor the countries of the European Union (European EconomicCommunity) in 1968, France extended VAT to the retail level while thefederal republic of Germany introduced in its tax system. The Netherlandand Sweden imposed this tax in 1969 while Luxemburg adopted in 1970,Belgium in 1971, in 1972 Ireland and Italy, UK and Australia in 1973,many other European countries have adopted VAT. Similarly manycountries in the north and South America, Africa, Oceania haveintroduced VAT.

VAT has been spreading in the Asian region as well. The republic ofVietnam adopted VAT briefly in 1973 (VAT was abolished soon but itwas reintroduced in 1999 in Vietnam). In Asia South Korea was the firstAsian country, which in 1977 with the help of International Monetary fund(IMF), succeeded to implement the VAT in its taxation system, China in1984, Indonesia in 1985, Taiwan in 1986, Philippines in 1988, Japan in1989, Thailand in 1992, and Singapore in 1994, while Magnolia hasbeen implementing this tax since 1998.


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In the South Asian Association for regional co-operation (SMRC) region,VAT has been considered in great depth in India. In 1986, Indiaintroduced VAT in a different way under the name of Modified ValueAdded Tax (MODVAT) unlike the VAT system of other countries. The

Indian MODVAT system was designed to cover manufacturing of goodsby giving credit of excise duty paid in inputs. The scope of MODVAT hasbeen extended over the years and since been renamed as Central ValueAdded Tax (CENVAT) which covers services also.

Pakistan adopted VAT in 1990, Bangladesh in 1991,and Nepal in 1997,and Sri-lanka in 1998 as VAT is less distortive and more revenueproductive it has been spreading all over the world, today about 130countries have adopted the same.

Meaning :

Value Added Tax (VAT) is a modern and progressive form of sales tax. Itis charged and collected by dealers on the price paid by the customer.VAT paid by dealers on their purchases is usually available for set- offagainst the VAT collected on sales. VAT in the form of CENVAT (Excise)is already in force in India for quite some time. Tax is one of theimportant sources of government revenues. Stability and continuity of

the flow of tax collection, play an important role in the governmentplannings for providing variety of the required public services in differentareas.

Change and reformation of national economy and, as a result, changesin the style of production and distribution of wealth and income; requiresrethinking of the existing taxes and their methods of tax collection allover the world, shows the efficiency and acceptability of this new kind oftaxation in providing a reliable source of incomes forgovernments. Implementation of the VAT with a fixed rate makes theforecast of government incomes possible resulting in possibility of betterplanning. On the other hand, the short term characteristic of collection ofthe tax, guarantees the continuity of the flow of income into thegovernment's treasury.

The Definition Of the Value Added Tax

Value Added Tax is not only a simple taxation system, but also is themost common model used in the world today. So, before anything else,


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we should know the meaning of value added and Value Added Tax.From economic point of view, the value added is the difference betweenthe worth of outputs and inputs. But in compilation of the law, it isdefined according to the accounting standards and by relaying on

invoice method. By considering the above point, the value added isdefined as the difference between the value of the goods and servicessupplied and value of the goods and services bought by a person in aspecific period of time.

By considering the above definition, the value added tax is a kind ofmultiphase tax, which is calculated and collected according apercentage of value added of the goods and services producedand supplied in the process of production and distribution cycle. This tax

in fact, is a kind of tax on multiphase sales, which exempts thepurchase of intermediate goods and services from tax payment.

Necessity of Implementing Value Added Tax

As mentioned above, tax is one of the main sources of government'sincomes, which is collected under different names. The tax incomesmake an important portion of the government's budget. In democraticcountries where the tax system is supported by a lawful and participatory

system; more than of 60% of the government's income in the budgetcome from tax incomes.

Implementation Method of the Value Added Tax

According to the Value Added Tax system, every seller, at the time ofselling of goods and services, will add the relevant tax on the invoiceand collects it together with the price of goods and services from thebuyer. The first seller pays the tax in whole to the government, but in the

next stages, each seller pays to the State Tax Organization only anamount equal to difference (collected tax after deducting the tax whichhe has paid previously). This will take place within two month periodaccording to the proposed bill. To clarify the procedure of the VAT, oneshould pay attention to the following paragraph:

A car manufacturing company for producing its cars buys its requiredparts from domestic market (part producers) and from external market(import). If we suppose that the value of internal supplied parts is 10

million Rials and the value of importing parts is 6 million Rials, and if wesuppose that the value added tax rate is 10%; this company should pay


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(10,000,000*10%= 1,000,000) when he buys from internal market andshould pay (5,000,000*10%= 500,000) when he imports parts as valueadded tax to the State Tax Organization. Also, if this company sells itscars at 4o million Rials, when he prepares the invoice, must calculate the

value added tax and is obliged to receive it from the buyer when heprepares the invoice ( 40,000,000 *10%= 4,000,000) . It is obvious thatthe price of the car for the buyer will be 44,000,000 Rials. The carmanufacturing company must deduct its payment of tax in previousstages (tax paid on buying from internal market and importation (whichwas 1,500,000 Rials) from the tax collected (4,000,000 Rials), and paythe remaining amount which is 2, 5000,000 Rials with the tax declaration(return) form to the State Tax Organization.

Tax received (tax paid to internal part producer + tax paid on import)=VAT payable

4,000,000 - (1,000,000 + 500,000) = 2,500,000

As we can see, total value added tax paid to the State Tax Organizationis 4,000,000 Rials which is the sum of (1,500,000 + 2,500,000).

Benefits of VAT

It is simple, transparent and progressive.

Business friendly system of taxation

. Reduction in the effective tax rate for many good

Elimination of Tax on Tax existing in the sales tax system.

Full set- off available for VAT paid on most business purchasessimplification of tax forms and procedures

Greater reliance on self assessment and voluntary compliance bydealers.

Value Added Tax is a methodology and way of thinking which shows apositive experience for many decades in different countries, and


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is recommended by majority of the economic and financial experts of theWorld Bank and International Monetary Fund.

In many countries which have used this kind of taxation model, the VATused as a new source of income generator for governments and resultedin more social equity than the other tax models , without any negativeeffects on investment and production motivation.

Due to the fact that value added tax model is a self control system, whichevery tax payer plays the role of tax collector; the cost of tax collection isminimum.

Due to the fact that in VAT, the tax payers, for getting the tax credit,are required to present invoice; the situation for automatic recognition ofthe amount of tax payers transactions will be prepared, and as a result acomprehensive information system including all the transactions will begenerated which, in addition to transparency of transactions betweenbusiness units, will facilitate implementation of other taxes such as taxon

Value Added Tax is a reliable, consistent, and at the same time, flexiblesource of income.

Due to the fact that VAT has a fixed rate, the time period for the tax tobecome definite is very short and it hasn't the difficulties of long timeperiod of becoming definite in the cases of the tax on income and

wealth.

Due to the fact the VAT is a new and modern model, its implementationresults in improvement of technology, productivity of taxation system andtaxation


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SLAB RATES

For Senior Citizen (Above 60 years)

Income Slabs Rateof Tax

Up to Rs. 2,50,000 Nil

Rs.2,50,001 toRs.5,00,000 10%

Rs.5,00,001 to Rs.10,00,000 20%

Above Rs.10,00,000 30%

For Senior Citizen (Above 80 years)

Income Slabs Rate of Tax

Up to Rs.5,00,000 Nil

Rs.5,00,001 to Rs. 10,00,000 20%

Above Rs. 10,00,000 30%


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For Women (Below 60 years)



Rs.2,00,001 to Rs.5,00,000 10%

Rs.5,00,001 to Rs. 10,00,000 20%

Above Rs. 10,00,000 30%

For Other Men



Rs.2,00,001 to Rs. 5,00,000 10%

Rs.5,00,001 to Rs. 10,00,000 20%

Above Rs. 10,00,000 30%


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Types of Business Are Liable For VAT

Importers Manufacturers

Distributers Wholesalers Retailers Works Contractors Lessors

How Is VAT Charged?

All registered dealers, regardless of where they are in the chain of

manufacture and production must charge VAT on their sales of taxablegoods and collect it from their customers. Registered dealers must issuea tax invoice to other registered dealers showing the VAT amount beingcharged as a separate amount. Registered dealers who pay VAT ontheir purchases can normally claim a set-off for the VAT paid to theirsuppliers. As a result, VAT is not a cost to the dealers. Dealers mustensure that tax is charged separately in their purchases invoice in orderto be eligible to claim set-off.

Certain dealers who sell mainly to customer at retail level can opt for asimplified system of VAT calculation and payment under a compositionschemed. Under the composition scheme, dealers will not issue a taxinvoice or show VAT as a separate amount on a bill or cashmemorandum.

VAT PROCEDURES:

Registration:

Registration is the process of obtaining Certificate of Registration (RC)from the authorities under the VAT acts. A dealers registered under theVAT acts is called a registered dealer. Any dealer, who intend to carryon the business of purchase and sale, of goods in the state and is liableto pay tax, cannot carry on the business unless he is registered andholds a valid registration certificate under the act.


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Eligibility for Registration

As per the provision contained in the white paper, registration of dealerswith gross annual turnover above Rs.5 lakh will be compulsory. There

will be provision for voluntary registration. All existing dealers will beautomatically registered under the VAT act. A new dealer will be allowed30 days time from the date of liability to get registered. An application forregistration should be made to the VAT commissioner.

The white paper specifies that registration under the VAT act will not becompulsory for the small dealers with gross annual turnover notexceeding Rs. 5 lakhs. However, the empower committee of statefinance ministers subsequently allowed the states to increase the

threshold limit for the small dealers to Rs. 10 lakhs with the conditionthat the concerned state would bear the revenue loss, on account ofincrease in limit beyond Rs. 5 lakhs.

Generally a dealers means any person, who consequent to, or inconnection with, or incidental to, or in the course of his business, buys orsells goods for a consideration or otherwise.

All sales or purchases of goods made within the state except the

exempted goods would be subjected to VAT.

Compulsory Registration:

If an assessee fails to obtain registration under the VAT act, he may beregistered compulsorily by the commissioner. The commissioner mayassess the tax due from such person on the basis of evidence availablewith him. In this event the assessee shall have to forth with pay suchamount of tax. Further, failure to get registered shall result in attracting

default penalty and forfeiture of eligibility to set off all input tax creditrelated to the period prior to the compulsory registration.

Voluntary Registration:

A dealer otherwise not eligible for registration may also obtainregistration if the commissioner is satisfied that the business of theapplicant requires registration. The commissioner may also impose anyterms or condition that he thinks fit.


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Cancellation of Registration:

The registration can be cancel on:

1. Discontinuance of business; or2. Disposal of business; or3. Transfer of business to a new location; or4. Annual turnover of a manufacturer or a trader dealing in

designated goods or services falling below the specified amount.

Obligation Of Dealers Registered For VAT?

Dealers who are to be registered for VAT must:

Charge and collect VAT on their sales of taxable goods Issue proper tax invoices Keep proper records and books of accounts Calculate the VAT due to government base on VAT charge on sales

LESS any VAT available as a set-off on business purchases. File VAT return on a regular basis declaring their VAT liability. Pay any amount of VAT due to the Government with the VAT return

Criticism:

Opponents of VAT claim VAT is regressive and is paid by all consumerswhether they are rich or poor, young or old. The poorest also spend ahigher proportion of their disposable income on VAT thanrichest. An Office for National Statistics report showed that in 2009/10the poorest 20% spent 8.7% of their gross income on VAT whereas therichest 20% spent only 4.0% of their gross income on VAT. Similarly, thepoorest 20% spent 9.7% of their disposable income on VAT whereas the

richest 20% spent only 5.2% of their disposable income onVAT. Supporters of VAT claim VAT is progressive as consumers whospend more pay more VAT.

The zero rating of food and allowing businesses to reclaim input VATmeans that the government in effect subsidies the food industry. Criticsalso argue that VAT is double taxation as consumers pay for goods andservices using income that has already been taxed. It is also argued thatVAT is an inefficient tax due to the numerous exemptions and

concessions.
http://en.wikipedia.org/wiki/Regressive_taxhttp://en.wikipedia.org/wiki/Office_for_National_Statisticshttp://en.wikipedia.org/wiki/Progressive_taxhttp://en.wikipedia.org/wiki/Double_taxationhttp://en.wikipedia.org/wiki/Double_taxationhttp://en.wikipedia.org/wiki/Progressive_taxhttp://en.wikipedia.org/wiki/Office_for_National_Statisticshttp://en.wikipedia.org/wiki/Regressive_tax


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It could also be argued that, compared to its predecessor Purchase Tax,VAT has encouraged the "throwaway society". Purchase Tax imposedhigh rates on new goods (especially luxury goods) but did not apply torepair services. VAT has increased the cost of repairs and encouraged

consumers to replace goods rather than have them repaired. VAT alsocovers second-hand goods (which Purchase Tax did not) and hasdiscouraged the re-use of goods through the second-hand market.

Variants of VAT

Gross Product Income Variant ConsumptionVariant Variant

Gross Product Variants:

It allows deduction for taxes on all purchases of raw materials andcomponents, but no deduction is allowed for taxes on capital inputs.That is, taxes on capital goods such as plant and machinery are notdeductible from the tax base in the year of purchase and tax on thedepreciated part of the plant and machinery is not deductible in thesubsequent years. Capital goods carry a heavier tax burden as they aretaxed twice. Modernization and upgrading of plant and machinery isdelay due to this double tax treatment.

Tax is levied on all

sales and deduction

for tax paid on inputs

excluding capital input

is allowed


sales with set-off for

tax paid on inputs

and only

depreciation oncapital goods


sales with deduction

for tax paid on all

business inputs

(including capitalgoods).


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Income Variant:

The income variant of VAT on the other hand allows for deductionpurchases of raw materials and component as well as depreciation on

capital of goods. This method provides incentives to classify purchasesas current expenditure to claim set-off. In practice, however, there aremany difficulties connected with the specification of any method ofmeasuring depreciation, which basically depends on the life of an assetas well as on the rate of inflation.

Consumption Variant:

Consumption variant of VAT allows for deduction on all business

purchasing including capital assets. Thus, gross investment is deductiblein calculating value added. It neither distinguished between capital andcurrent expenditure nor specifies the life of assets or depreciationallowances for different assets. This form is neutral between themethods of production; there will be no effect on tax liability due to themethod of production (i.e. substituting capital for labor or vice versa).The tax is also neutral between the decision to save or consume.

Among the three variants of VAT, the consumption variant is widely used

several countries of Europe and other continents have adopted thisvariant. The reasons for preference of this variant are:

Firstly, it does not affect decision regarding investment because the taxon capital goods is also set-off against the VAT liability. Hence, thesystem is tax neutral in respect of techniques of production (labour orcapital-intensive).

Secondly, the consumption variant is convenient from the point of

administrative expediency as it simplifies tax administration by obviatingthe need to distinguish between purchases of intermediate and capitalgoods on the one hand and consumption goods on the other hand.

In practice, therefore, most countries use the consumption variant. Also,most VAT countries include many services in the tax base. Since thebusiness gets set-off for the tax on services, it does not cause anycascading effect.


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Tax Exemptions in Value Added Tax System

In general, some goods and services are exempted from taxation due tothe following reasons:

1. Decreasing the regressive virtue of the Value Added Tax

2. Deceasing the effects of inflation and supporting low income groups

3. Decreasing the tax implementation and collection costs

Different Goods and Services - And Their VAT Rate

The following sections list different goods and services that are reduced-rated, zero-rated, exempt or outside the scope of VAT. These rates mayonly apply if certain conditions are met, or in particular circumstances,depending on some or all of the following:

who's providing them or buying them

where they're provided

how they're presented for sale

the precise nature of the goods or services

whether you obtain the necessary evidence

whether you keep the right records

whether they are provided with other goods and services

How to Find the Right VAT Rate for Particular Goods and Services

It's important that you know the right VAT rate for the goods andservices that you buy and sell. In some cases, the correct rate of VATdepends not just on the goods or services themselves, but also on otherconditions and the circumstances of the sale. For some trade sectorsthere are special rules about how much VAT to charge or reclaim in

particular circumstances


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VAT Invoice:Invoice is a document listing goods sold with price, tax charged andother details as may be prescribed and issued by a dealer authorizedunder the act.

The whole structure of the VAT with input tax credit is founded on thedocumentation of a tax invoice, a cash memo or a bill. The white papermainly provides for the following provisions, which are mandatory, andfailure to comply with these attracts penalty:

1. Every registered dealer whose turnover of sales exceeds thespecified amount shall issue to the purchaser a serially numbertax invoice, cash memo or bill with the prescribe particular.

2. The tax invoice shall be dated and sign by the dealer or hisregular employee, showing the required particulars.

3. The dealer shall keep a counterfoil or duplicate of such tax invoiceduly signed and dated.

Importance of VAT Invoice (Tax Invoice)

Invoices are crucial documents for administering VAT. In the absence ofinvoices VAT paid by the dealer earlier cannot be claimed as set off.Invoices should be preserved with full care. In case any original invoiceis lost or misplaced, a duplicate authentication copy must be obtainedfrom the issuing dealer.

1. A VAT invoice helps in determining the inputs tax credit.2. It prevents cascading effect of taxes3. Facilitates multi-point taxation on the value addition4. Promoted assurance of invoices5. Assists in performing audit and investigation activities effectively6. Checks evasion of tax

Contents of VAT Invoice:

VAT legislation of all states provide for the contents of the tax invoice.By and large there would be no need for a separate tax invoice;aregular invoice can also be termed as tax invoice if it has the prescribedcontents. Generally, the various legislation provides that the tax invoiceshould have the following contents:

1. The words Tax Invoice in a prominent place.2. Name and address of the selling dealer.


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3. Registration number of the selling dealer.4. Name and address of the purchasing dealer.5. Registration number of the purchasing dealer (may not be

required under all VAT legislation).

6. Pre-printed or self generated serial number.7. Date of issue.8. Description, quantity and value of goods sold.9. Rate and amount of tax charged in respect of taxable goods.10. Signature of the selling dealer or his regular employee duly

authorized by him for such purpose.

Other Invoices:

Normally, a dealer is expected to indicate the rate of tax and theamount of tax charged in the invoice issued. However, in case ofsmall dealers or if the sale is to end consumer, other invoices arepermitted without the details of tax. Such invoices should contain thefollowing particulars:

1. Name and address of the selling dealers2. Registration number of the selling dealer3. Name and address of the purchasing dealer

4. Registration number of the purchasing dealer5. Pre-printed or self generated serial number6. Date of issue7. Description, quantity and value of goods sold8. Signature of dealer or his /her representative


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Format of Tax Invoice

Tax Invoice

Original-Buyers Copy

Sellers Name............ Tax Invoice No. ...

Address . Date:

..

Challan No. And Date

Phone No. Buyers Name And Address ...

VAT Registration No. Buyers VATRegistration No., If Any

CST Registration No.

S No. Quantity DescriptionOf Goods

PricePerUnit

Value(Rs.)

VATRate

TaxAmt

Total(Rs.)

Total

Rupees In Figure

E & O.E Signature

(Of Selling Dealer Or His Authorized Employee)


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Rates of Tax:

There are currently three rates of VAT: standard (20%), reduced (5%)and zero (0%). In addition some goods and services are exempt from

VAT or outside the VAT system.

Standard (20%) Reduced(5%)

Zero (0%). Exempt FromVAT

OutsideThe VAT

Alcoholic drinksBiscuits

(chocolatecovered only)Bottled water(inc. mineralwater)Calendars &diariesCarbonated(fizzy) drinks

CDs, DVDs &tapesCereal barsChocolateClothes &footwear (notfor childrenunder 14)Confectionery/s

weetsDeliverycharges(postage &packaging)Electrical goodsElectricity, gas,heating oil &solid fuel(business)Food & drinks

Children'scar seats

Electricity,gas, heatingoil & solidfuel(domestic/residential/charity non-business)Energy

savingmaterials(permanentlyinstalled inresidential/charitypremises)Maternitypads

Mobility aidsfor theelderlySanitaryprotectionproductsSmokingcessationproducts

Aircraft Bicycle &motorcycle

helmetsBiscuitsBooks, maps &chartsBread, rolls, baps& pita breadBrochures, leaflets& pamphletsBuilding services

for disabled peopleCakes)Canned & frozenfood ,CerealsChilled/frozenready meals,convenience foodsClothes & footwear(for children under

14 only)Construction &sale of newdomestic buildingsCooking oilDonated goodssold at charityshopsEggsEquipment fordisabled people

Antiques,works of art or

similarBurial orcremation(human)Commercialland &buildings(selling/leasing/letting)

Culturaleventsoperated bypublic bodies(museums, artexhibitions,zoos &performances)Education,

vocationaltraining,researchFinancialservices(moneytransactions,loans/credits,savings/deposits,shares/bonds)

Goods &services

soldoutside theEUGoods &servicessuppliedbyunregistered supplier

Statutoryfees &services(MOTtesting,congestioncharge etc)Tolls forbridges,

tunnelsand roads(operatedby publicauthorities)Voluntarydonationsto charity


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supplied forconsumption onthe premises (atrestaurants,

cafes etc)Hot take-awayfood & drinks(inc. burgers,hot dogs,toastedsandwiches)Ice creamFruit juice &

other colddrinks (not milk)Nuts (shelled,roasted/salted)Potato crispsPrams &pushchairsRoad fuel(petrol/diesel)Salt (non-

culinary)StationeryTaxi faresTolls forbridges, tunnels& roads(priVATelyoperated)Water

(industrial)

(inc. blind/partiallysighted)Fish (inc. live fish)Fruit & vegetables

Live animals forhumanconsumptionMeat & poultryMilk, butter,cheeseNewspapers,magazines &journals

Nuts & pulses (rawfor humanconsumption)PrescriptionmedicineProtective boots &helmets (industrial)Public transportfares (bus, train &tube)

Salt (culinary)Sandwiches (cold)Sewerage(domestic &industrial)Shipbuilding ,Tea,coffee & cocoaTransport in avehicle, boat or

aircraftWater (household)

Funeral planinsuranceGambling(betting,

gaming, bingo,lottery)Healthservices(doctors,dentists,opticians,pharmacists &other health

professionals)InsuranceMedicaltreatment &careMembershipsubscriptionsPostagestampsPostal

services(RoyalMail/otherlicensedoperators)Sportsactivities &physicaleducation

TV license


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Merits and Demerits of VAT

Merits:

1. No Tax Evasion:It is said that VAT is a logical beauty. Under VAT, credit of dutypaid is allowed against the liability on the final productmanufactured or sold. Therefore, unless proper records are kept inrespect of various inputs, it is possible to claim credit hence,suppression of purchases or production will be difficult it will leadto loss of revenue.

2. Neutrality:

The greatest advantage of the system is that it does not interfere inthe choices of decision for purchases. The system is neutral withregard to choices of production techniques as well as businessorganization. All other things remaining same, the issue of taxliability does not vary the decision about the source of purchase.

3. Certainty:The VAT is a system base simply on transaction. Thus there is noneed to go through complicated definition like sales, sales price,turnover of purchases and turnover of sales. The tax is also broad-based and applicable to all sales in business leaving little room fordifferent interpretation. Thus, this system brings certainty to greatextent

4. Better Accounting Systems:Since the tax paid in an earlier stage is to be received back, thesystem will promote better accounting systems.

5. Effect On Retail Price :

A persistent criticism of the VAT form has been that since the taxis payable on the final sale price, the VAT form increases theprices of the goods However ,VAT does not have any inflationaryimpact as it merely replaces the existing equal sales tax. It mayalso be pointed out that with the introduction of VAT; the taximpact on raw material is to be totally eliminated. Therefore, theremay not be any increases in the prices.


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6. Better Revenue Collection And Stability:The government will receive its due tax on the final consumer/retail sale price. There will be a minimum possibility of revenueleakage, since the tax credit will be given only if the proof of tax

paid at an earlier stage is produced. This means that if the taxevaded at one stage, full tax will be recoverable from the person atthe subsequent stage or form a person unable to produce proof ofsuch tax payment. Thus, in particular, an invoice of VAT will be selfenforcing and will induce business to demand invoices from thesuppliers. Another attribute of VAT is that is an exceptionally stableand flexible source of Government revenue.

7. Transparency:Under a VAT system the buyer knows, out of the totalconsideration paid for purchase of material, what is taxcomponent. Thus, the system ensures transparency also. Thistransparency enables the state governments to know as to what isthe exact amount of tax coming at each stage. Thus, it is a greataid to the government while taking decisions with regard to rate oftax etc.

Demerits:

1. The merits accrue in full measure only under a situation wherethere is only one rate of VATand VAT applies to all commoditieswithout any question of exemption whatsoever. Onceconcession likes differential rates of VAT, compositionschemes, distortion are bound to occur and fundamentalprinciple that VAT will totally eliminate cascading effects oftaxes will also be subject to qualification.

2. In the federal structure of India in the context of sales tax, so

long as central VAT is not integrated with the state VAT, it willbe difficult to put the purchases from other states at par with thepurchases. Therefore, the advantage of neutrality will beconfined only for purchases within the state.

3. For complying with the VAT provisions, the accounting cost willincrease. The burden of this increase may not becommensurate with the benefit to traders and small firms.

4. Another possible weak point in the introduction of VAT, whichwill have an adverse impact on it, is that, since the tax is to be


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imposed or paid at various stages and not on last stage, itwould increase the working capital requirement s and theinterest burden on the same. In this way it is considered to benon-beneficial as compared to the single stage-last point

taxation system.

5. VAT is a form of consumption tax. Since, the proposition ofincome spent on consumption is a larger for the poor than forthe rich, VAT tends to be regressive. However, this weakness isinherent in all the forms of consumption tax. While it may bepossible to moderate the distribution impact of VAT by taxingnecessities at a lower rate, it is always advisable to moderatethe distribution consideration through other programmed rather

than concession or exemption, which create complication foradministration

6. As a result of introduction of VAT, the administration cost to thestate can increase as the number of dealers to be administeredwill go up significantly

VAT In Indian Context:

The Indian union is a federal structure under the constitution of India.The central government and the state government derive their powersthrough the instrumentality of the union list, the state list and theconcurrent list. So far as powers of taxation are concerned there areclearly specified areas over which the central government and the statescan exercise their jurisdiction

While income tax, excise duty and customs duty constitute the major

source of tax revenue to the central government, the states governmentsubstantially depends on sales tax as the main source of revenue. Thecentral government undertook a series of reforms in indirect taxes, themajor among which was the introduction of modified VAT, which iscurrently in operation as CENVAT. However, in view of the constitutionalconstraints, CENVAT applies to goods and services but not to sales taxand state-level VAT.


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Central Value Added Tax (CENVAT):

At the central level, at the time of independence, India inherited asystem of commodity taxes in which excise duties were levied on about

dozen articles yielding a small proposition of total tax revenue to thecenter. Following independence, the rates were brought into its net.Over time, there was a speedy extension of excise duties. It was not onlylevied on finished goods but also covered raw.

Role of Chartered Accountant in VAT:

1. Record Keeping :VAT required proper record keeping and accounting. Systematic

records of input credit and proper utilization is necessary for thesuccess of VAT. Chartered accountants are well equipped toperform such tasks

2. Tax Planning:In order to establish an efficient plan for purchases and sales, acareful study of VAT is required. A chartered accountant iscompetent to analyze the impact of various alternative sand choosethe most optimum method of purchases and sales in order to

minimize the tax impact.

3. Negotiation With Suppliers To Reduce Price :VAT credit alters cost structure of goods supplied as inputs. Achartered accountant will ensure that the benefits of such costreduction are passed on by the suppliers to his company. However,if the buyers of his company make the similar demand, he must beready with full data to resist the claims.

4. Handling The Audit By Departmental Officers:There will be audit wing in department and certain percentage ofdealersWill be taken up for audit every year on scientific basis. Charteredaccountant can ensure proper record keeping so as satisfying thedepartmental auditors. The professional expertise of a charteredaccountant will help him in effectively replying audit queries andsorting out audit objections.

5. External Audit Of s Records :

Under VAT system, trust has been reposed on tax payers as therewill be no regular assessment of all VAT returns but only few


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returns will be scrutinized. In other cases, returns filed by dealerwill be accepted. Thus, a check on compliance becomesnecessary. Chartered accountants can play a very vital role inensuring tax compliance by audit of VATaccounts.VAT laws of

some states provide for audit by outside agencies. In Karnataka,audit report is required if turnover exceeds rs.25 lakhs. AndhraPradesh VAT act provides for audit by chartered accountant, ifaudit is ordered by commissioner. Maharashtra VAT laws providefor audit chartered accountant if turnover exceeds Rs. 40 lakhs.Other states may also prescribe external audit, once they see theutility of audit reports finished by chartered accountant in ensuringtax compliance.

Audit:

In the VAT system considerable weight age is placed on audit work inplace of routine assessment work.

Correctness of selfassessment will be checked through a system ofdepartmental audit. A certain percentage of the dealers will be taken upfor audit every year on a scientific basis. If, however, evasion is detectedin the course of audit, the previous record of the concerned dealers may

be taken up for audit.

Authorized officers of the department will visit the business place of thedealer to conduct the audit. The auditors will examine the correctness ofthe returns vis--vis the books of account of the dealer or any otherinformation available with them. They will be equipped with theinformation gathered from various agencies such as suppliers, incometax department, and excise and customs department, banks etc. officersof the higher rank will supervise to ensure that the audit work is done ina free, fearless and impartial manner.

Audit Provisions under VAT:

Like majority of the developing economics our country is also facing theproblem of lack of education and awareness about tax laws, moreparticularly amongst the trading community. Further, theVAT system oftaxation is new to them. Since the trading community is not educatedenough and equipped to understand the implication of the VAT system

of taxation immediately, there is every possibility that they may not be ina position to arrange their business affair to fall in line with the


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requirement of the state-level VAT and calculate and discharge theirexact tax liability under the VAT laws. On the other hand, the taxadministrator i.e. the authorities in the taxation department also findthemselves devoid of sufficient resources to educate the tax payers and

inform them about the procedural and accounting changes that arenecessitated by the implementation of VAT system.

Further, under the VAT system a major thrust is to be laid on the selfassessment i.e. the tax liability, calculated and paid by the tax payersthrough their periodical returns, will be accepted by and large and thetax payers will not be called to substantiate the tax liability shown bythem in the return by producing books of account will be an exception.

Therefore, there is a strong need to see that the tax payers dischargetheir tax liability properly while filling the return. This can be ensured onlywhen the particularly furnished by the tax payers are verified by anindependent auditor in minute details by:

Going through the books of account and Analyzing and interpret the provisions of the state-level VAT laws

and Reporting the under-assessment, if any, made by the dealer

requiring additional payment or Reporting any excess payment of tax warranting refund to the taxpayers.

In most of the countries tax evasion is rampant under the existing taxsystem. In India too, evasion of excise and sales-tax is estimated to bevery high. If no audit is prescribed under VAT law, the chances ofevasion of VAT tax will increase causing revenue leakage for thegovernment. It is therefore, essential that the audit of the proposed VATsystem is attempted on a regular basis. However, it is not possible toconduct the audit of all the VAT dealers. Therefore, the criteria for auditcan be the amount of turnover or the class of dealer dealing in specifiedcommodities.

The concept of audit is popular even in foreign countries where thesystem of VAT is in practice since long in the field of indirect taxation. Incountries like France and Korea the audit has proved to be an effectivetool to check the evasion of tax, which was mostly done by producingfake invoices etc.


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Since VAT is a new concept, some of the states want to keep theprocedural formalities to the minimum. Hence, at the initial stage theirlaw makers refrain from keeping any audit provision in their act andrules. Perhaps, this may be due to the initial stage of introduction of

VAT. But most of the states, keeping in mind the importance of audit;have incorporated the audit provision since inception.

Some states like the state of Maharashtra and state of Kerala haveprovided detailed particulars to be furnished by various dealers inrespect of their VAT assessees.

Methods Of Computation Of VAT

Addition Method:

This method aggregates all the factor payments including profit to arriveat the total value addition on which the rate is applied to calculate the taxthis type of calculation is mainly used with income variants of VAT.Addition method does not easily accommodate exemption of

ADDITIONMETHOD

Aggregating all thefactor payments and

profit

INVOICE METHOD

Deducting tax on

inputs from tax onsales

SUBSTRACTION

METHOD

DIRECT SUBSTRACTION METHOD

Deducting aggregating value ofpurchase exclusive of tax from the

aggregate value of sales exclusive of tax

INTERMEDIATESUBSTRACTION METHOD

Deucting tax inclusive value of

purchases from the sales and taxingdifference between them


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intermediate dealers. A drawback of this method is that it does notfacilitate matching of invoices for detecting evasion.

Invoice Method:

This is the most common and popular method for computing the taxliability under VAT system. Under this method, tax is imposed at eachstage of sales on the entire sale value and the tax paid at the earlierstage is allowed as set off. The most important aspect of this method isthat at each stage, tax is to be charged separately in the invoice. Thismethod is very popular in western countries. This method is also calledthe Tax Credit Method or Voucher Method.

Subtraction Method:

While the above stated invoice or tax credit method is the mostcommon method of VAT, another method to determine the liability oftaxable person is the cost subtraction method, which is also a simplemethod. Under this method, the tax is charged only on the value addedat each stage of the saleof goods. Since, the total value of goods sold isnot taken into account, the question of grant of claim for set- off or taxcredit does not arise. This method is normally applied where the tax is

not charged separately. Under this method for imposing tax, valueadded is simply taken as the difference between sales and purchases.

ICAIs Role in VAT:

The ICAI has rendered pioneering service in evolving the necessaryaccounting guidelines both for CENVAT as well as state level VAT. Ithas brought out guidance notes for accounting for CENVAT as well asstate level VAT. These guidance notes address all the accounting issues

in regard to CENVAT and state level VAT in India. Further the institutehas brought out a comprehensive study on state on level VAT in India. Itcontains an elaborate discussion of the various general principles ofVAT and state level VAT. These general principles have beenincorporated in the various state level VAT legislations.

Tax- Payer Identification Number:

TIN number, you may hear this first time when you newly into business

or otherwise you can know it from someone who already doing business


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within India. By reading this post, you can know that what TIN Numberis? Who needs it and How to apply for TIN?

What Are T.I.N No, CST No. and VAT NO.?

TIN stands for Tax-Payer Identification Number, is unique numberallotted by Commercial tax department of respective State. Its an elevendigit number to be mentioned in all VAT transactions andcorrespondence.

TIN number is used to identify dealers registered under VAT. First twodigits of TIN indicate the issued state code. However, Other 9 digit ofTIN creation may differs by state governments.

TIN is applied for both sales done within a state or between two or morestates. Tin is also being used to identify dealers in the same way likePAN, to identification of assesses under income tax act.

The registration number allotted to the dealers is popularly known as TINi.e. Taxpayer Identification Number. This is an eleven digit number to bequoted in all VAT transactions and correspondence.

The Tax Payers Identification Number (TIN) is new unique registrationnumber that is used for identification of dealers registered under VAT. Itconsists of 11 digit numerals and will be unique throughout the country.First two characters will represent the State Code as used by the UnionMinistry 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 PANis used for identification of assesses under Income Tax Act. All the

dealers seeking for new registration under VAT or Central Sales Tax willbe allotted new TIN as registration number, however every StateCommercial Tax Department have made provisions to issue new TIN totheir existing dealers replacing old registration/ CST number.

So In brief there is no difference in VAT number, TIN or CST number,now only one number is required for all type of sales i.e. TIN it may becalled VAT number as it is used intra state sales and may be called CSTnumber as same is required for CST number .TIN is being issued to all

new dealers whether required for intra or interstate sales but for old


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dealer (interstate) CST number will be changed with TIN in phasedmanner and method adopted by each state is different.

Who Needs TIN Number?

Tin number registration is must for Manufacture/Traders/Exporters/Dealers. It comes to new registration under VAT or Centralsales tax will be allotted new TIN as registration number. However, allstate commercial tax department of India has stipulation to provide newTIN to existing Manufacture/Traders /Exporters/Dealers to replace theirold registration / CST number.

So, there is no difference in VAT/CST/TIN because these days only one

number is needed for all type of sale you made. TIN number is calledVAT number when it used for intra state sales. The same TIN number isbeing consider as CST number when it required.

Which Documents Required Applying For TIN Number?

1. ID Proof / Address proof / PAN card of proprietor with 4 to 6 number ofphotographs

2. Address proof of Business premises;

3. 1st Sale / Purchase Invoice, copy of LR/GR & payment/collection proofwith bank statement.

4. Surety/Security/Reference.Please check the applicability of each state

How to Apply For TIN Number?

Gone are the days standing in long queues to submit an application toGovernment Department. E- Government as swept all over India. Thiscan be done by online.

Need Help?

Are you looking someone to help you to apply TIN number andcalculating your Tax and file it behalf of you? Then, Reach Accountant is


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the right choice to do it with. Reach our Customer support @ 0-8695594333 [email protected]

Bank Reconciliation

Meaning:

The cash Book and Pass Book are prepared separately. TheBusinessman prepares the Cash Book and the Pass Book is preparedby the Bank (here by cash book we mean three column cash Book). Butas both the books are related to one person and same transactions arerecorded in both the books so the balance of both the books shouldmatch i.e. the balance as per Pass Book should match to balance at

bank as per cash book. But many a times these two balances do notagree then, it becomes necessary to reconcile them by preparing astatement which is called Bank Reconciliation Statement.

Now, Automate the Process of Reconciling Bank TransactionsDid youknow that you can now reconcile the banking transactions of yourcompany for each cheque issued, and even print the payment adviceand deposit slips, using

Most businesses these days prefer to receive and make payments viatheir bank accounts. Typically, while transacting via the bank, anorganization prepares a deposit slip to credit the payments received intothe firms account, generates payment advice and tracks funds in orderto always ensure that the bank account has the minimum funds requiredat all times. But as the number of transactions increase, it becomes achallenging task for organizations to prepare a large number of depositslips, covering letters, and reconcile the bank ledger balance and thebank statements. Tally.ERP 9 Release 3.0 has made life simple, it

allows you to effortlessly print cheques, reconcile the entries in books ofaccounts, and generate deposit slips and payment advice, wheneverrequired.

Bank reconciliation explains the difference between the bank balanceshown in an organizations bank statement and the correspondingamount shown in the organizations accounting records, on a particulardate.
mailto:[email protected]:[email protected]


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How Reconcile the Bank Statement

Go to Gateway of Tally > Banking > Bank Reconciliation

Select the name of the required bank

The Bank Reconciliation screen appears:

Match every transaction with the bank statement and record thetransaction date in the

Bank Date field

Accept the screen to reconcile the bank ledgers as per thecorresponding banking statement. On successfully reconciling, the 'BankReconciliation' screen appears as shown:

Tally.ERP 9 also allows you to record the un-reconciled transactionsbased on the nature of transactions. Recording un-reconciledtransactions Un-reconciled transactions can be entered by clicking U:Opening BRS or pressing Alt+U in the Bank Reconciliation screen. Inthis screen, the user can enter all transactions in which the cheques

were issued but not presented, or when cheques were received but notpresented. This will be useful under the following circumstances:

When a company starts bank reconciliation in the middle of thefinancial year by setting an effective date in the bank ledger.

Or when the opening balance of the bank account having unreconciledtransactions is brought forward to the banks ledge recordingtransactions during reconciliation, some transactions like the banks

charges, the interest paid by the Bank, etc., need to be recorded. Thesetransactions can be recorded at the Banking screen by simply clickingC: Create Vouchers or pressing Alt+C in the Bank Reconciliationscreen and choosing the required voucher. Generating deposit slips youcan generate deposit slips for the payments received through chequesor demand drafts, which can be deposited to the bank later. To generatethe deposit slip The Payment Advice screen for the selected ledgerappears, as of the company.


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RECIEPT SLIP

State Bank Of IndiaDeposited In BranchMulund..Date:08/07/2013

A/C HoldersName: Bhavanjibhai Gala..

Account MaintainedWithMulund...Branch

Type Of Account..A/C Number.02459867112

Rupee: Twenty Five Thousand RupeesOnly.

Cheque/DD/Cash/Particulars AmountRs.Ps

Bhavesh PatelChq No.12246

Scroll No.

Total 25000/-

Cash / Passing Officer

State Bank Of India

Deposited In BranchMulund..Date:15/07/2013

A/C HoldersName: Bhavanjibhai Gala..

Account MaintainedWithMulund...Branch

Type Of Account..A/C Number.02459867112

Rupee: Fifty Four Thousand Rupees Only

Cheque/DD/Cash/Particulars AmountRs.Ps

Swapnil UkaniChq No.026992

Scroll No.

Total 54000/-

Cash / Passing Officer


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RECORD SLIP

PASS BOOK

Date Chequeno.

Particular Withdrawals Deposits Balance

01/07/201303/07/201308/07/201309/07/201313/07/2013

15/07/201320/07/201323/07/201329/07/201331/07/2013

1224600000010000002

026992000000300000040000005

By CashBy CashBy Bhavesh PatelSelfTelephone Bill

By Swapnil UkaniRajesh ShahSelfSelfInterest Credit

100001500

500030009000

50002000015000

54000

360

5000 Cr.25000 Cr.40000 Cr.30000 Dr.28500 Dr.

82500 Cr.77500 Dr.74500 Dr.65500 Dr.65860 Cr.

How to Prepare a Bank Reconciliation Statement

(a) Compare transactions that appear on both Cash Book and BankStatement(b) Update Cash Book from details of transactions appearing on BankStatement(c) Balance the bank columns of the Cash Book to calculate the revisedbalance

complete a Bank Reconciliation Statement

DATE CHEQUE

NAME OFPAYEE

WITHDRAWALS DEPOSITS BALANCE

09/07/2013 0000001 Self 1000013/07/2013 0000002 Telephone Bill 1500

20/072013 0000003 Rajesh Shah 5000

23/07/2013 0000004 Self 3000

29/07/2013 0000005 Self 9000


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(a)Enter correct date of the statement(b) Enter the balance at bank as per the Cash Book(c) Enter details of UN presented cheques

(d) Enter sub-total on reconciliation statement(e) Enter details of bank lodgments(f) Calculate balance as per Bank Statement

Definition of Bank Reconciliation Statement

BANK RECONCILIATION STATEMENT may be defined as a statement

Showing the items of differences between the cash Brook balance and

the pass Book balance, prepared on any day for reconciling the twobalances.

Need and Importance of Bank Reconciliation Statement

The need and importance of the bank reconciliation statement may begiven as Follows:

1. The reconciliation process helps in bringing out the errors committed

either in cash Book or Pass Book.

2. Bank reconciliation statement may also show any undue delay in theclearance of cheques.

3. Sometimes the cashier may have the tendency of cheating like hemay made entries in the Cash Book only but never deposit the cash intobank. These types of frauds by the entrepreneurs staff or bank staff maybe detected only through bank reconciliation statement. So this way

bank reconciliation statement acts as a control technique too.

Causes for Differences

A transaction relating to bank has to be recorded in both the books i.e.Cash Book and Pass Book but sometimes it happens that a banktransaction is recorded only in one book and not recordedsimultaneously in other book this 221causes difference in the twobalances. The causes for difference may be illustrated in detail as

follows:


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Causes Cash Book and Pass Book

1. Cheques issued but not yet presented for payment Entry is madeBalance=Decreased No entry is made till the cheques are presented for

payment. Balance= Same as before

2. Cheques paid into the bank but not yet cleared. Entry is madeBalance=Increased No entry is made till the cheques are clearedBalance = same

3. Interest allowed by the Bank No entry is made till the Pass Book ischecked Balance = Same Entry is made Balance = Increased

4. Interest and Expenses Charged by the Bank No entry is made till thePass Book is checked Balance = Same Entry is made Balance =Decreased

5. Interest and dividends collected by Bank No entry is made till the PassBook is checked Balance = Same Entry is made Balance = Increased

6. Direct payments by the bank No entry is made till the Pass Book ischecked Balance = Same Entry is made Balance = decreased

7. Direct payments into the bank by a customer No entry is made till thePass Book is checked Balance = Same Entry is made Balance =Increased

8. Dishonor of a bill discounted with the bank No entry is made till thepass Book is checked Balance = Same Entry is made Balance =decreased

9. Bills collected by the bank on behalf of the customer No entry is madetill the Pass Book is checked Balance = Same Entry is made Balance =Increased

10. Errors committed either in Cash Back or Pass Book

Procedure for E-Filing of TDS Returns


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1. Objective:

The basic objectives of computerization of TDS returns is to cutdown the compliance cost for deductors, to correlate deduction of

taxes made by deductors with the deposit of the deducted tax inthe Government account in a designated bank/and correlatededuction of tax by the deductors with the corresponding creditsclaimed by the deductees. In phase-I of TIN it is proposed toreceive the electronic TDS returns of corporate deductors and todigitize the paper TDS returns of other deductors. In Phase-II ofTIN the work relating to dematerialization of TDS certificates willbe taken up so that cross verification of deduction by theDeductors with the Claims of deductees can be carried out. Someof the issues pertaining to this Scheme are explained in the form ofFrequently Asked Questions (FAQS) and are Available on this site.

2. Scheme For Electronic Filing Of TDS Returns:

The scheme for electronic filing of TDS returns was notified on26.8.2003. The Board Circular No.8 dated 19.9.2003 clarifies theprocedure in this regard. The Procedure basically envisages thatcorporate deductors will prepare their TDS returns in the new TDSreturn Forms24, 26 or 27, according to the data structure notifiedby e-Filing Administrator. The E-TDS returns in the prescribed data

structure stored on CD ROM and supported by a duly signedcontrol chart inform27a in paper format will be submitted to an E-TDS Intermediary appointed by the Board.

3. E-TDS Administrator And E-TDS Intermediary:

The CBDT has appointed Director General of Income-tax(Systems) as E-TDS Administrator. Separately, M/s NationalSecurities Depository Limited (NSDL), who are also the agency

hosting TIN, have been appointed as E-TDS Intermediary. Duringthe current financial year, NSDL will be opening their front officesat 42 stations throughout the country, for receiving E-TDS returnsof all deductors. NSDL w.e.f. 19.01.2004 will set up their frontoffices called as TIN Facilitation Centre at 42 stations throughoutthe country, for receiving. TDS returns w.e.f. 19.01.2004. NSDLwill set up their front offices at 65 stations more during the nextfinancial year so that they will have presence at all stations whereadministrative CsIT are located.

4. Procedure For Allotment Of TAN:


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1) All deductors required to E-file their TDS returns have to quotetheir reformatted Tax Deduction Account Numbers (TAN) in theirrespective TDS returns. A large number of deductors have already

obtained these re-formatted TANs which are unique countrywide.Wherever TAN has not been allotted or old TANs have not beenreformatted, applications in Form 49B can be filed with NSDL. Allold applications for allotment of new TAN/ reformatted TANpending in the Department, will be disposed at the earliest

2) NSDL has also been authorized to receive applications (form49B)for allotment of TAN at their front offices for fee of Rs.50/- tobe paid by the applicant to them. The data in respect of such TANapplications will be entered by NSDL and sent to NationalComputer Centre (NCC) of Income-tax Department and therespective computer centers on-line. The allotment of TAN will bedone by the IT department centers and communicated online toNSDL who will intimate the same to the applicant.

5. Preparation Of E-TDS Returns:

1) New forms of TDS returns in Form No.24, 26, & 27 (enclosedherewith), a control chart in Form 27Ahave been notified by the

Board vide notification dated31.7.2003 consequent upon

amendment to Rule 30 of IT Rules, 1962. The E-TDS returns have

to be prepared in these new forms and according to the data

structure prescribed by E-TDS administrator. This is necessary so

that the data structure of E-TDS returns is compatible with the

departmental application software for processing the same.

2) The prescribed data structure can be downloaded from thiswebsite as also of NSDL (http://tin.nsdl.com) this can also be

obtained from the front offices of NSDL. While preparing the E-

TDS returns, the deduct or has to ensure that following mandatory

requirements listed in Circular No.8 of CBDT dated 19.9.2003, are

complied with :

I. Tax deduction Account Number (TAN) of the deduct or is clearlymentioned in the TDS return as also on Form No.27A, as required

by sub-section (2) of section 203A of the Income-tax Act. However,


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in cases where TAN is not available the E-TDS returns will also beaccepted if the same is accompanied with an application inForm49Bfor allotment or for reformatting.

II. Full particulars relating to deposit of tax deducted at source, in thedesignated bank are correctly and properly filled in the table atitem No.6 of Form No.24 or item No.5 of Form No.26 or item No.5of Form No.27, as the case may be.

III. The data in the E-TDS return is as per the data structureprescribed by the e-Filing Administrator.

IV. The Control Chart in Form 27A is duly filled in all columns, signed

and enclosed in paper form with the return on computer media. (v)The Control Totals of the amount paid and the tax deducted atsource as mentioned at item No.3 of Form No. 27A tally with thecorresponding totals in the E-TDS return in Form No. 24 or FormNo. 26 or Form No. 27, as the case may be. In case any of thesemandatory requirements are not fulfilled, the E-TDS return will notbe received by the E-TDS intermediary.

V. The deductors should prepare their E-TDS return as per the above

procedure, store the data on a CD ROM, enclose the control chart(Form 27A in paper format) and submit these at any of the frontoffices of NSDL. Although the scheme permits E-TDS returns to beprepared on a floppy, it would be preferable that these areprepared on a CD ROM to avoid any loss of data, viruses etc.

6. Filing of E-TDS Returns:

I. The E-TDS return can be filed at any of the TIC FacilitationCenters offices being opened by NSDL at 42 cities. At the receiptstage, these front offices will carry out validation checks on the E -TDS returns to ensure compliance with above five parameters, anda provisional receipt will be issued on successful validation.

II. Section 139A (5 B) requires that PAN of the deductees should bementioned in the TDS returns. Wherever PAN of deductees is not

mentioned by a deductor in his E-TDS return, this fact will berecorded on the provisional receipt as deficiency, to be removed


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by the deduct or. However, in such cases, NSDL will accept the e -TDS returns. The deficiency can be removed by the deduct orwithin 7 days, failing which the E-TDS returns will be sent by NSDLto the Department indicating the deficiency therein for appropriate

action by the concerned A.O.

7. Upload Charges:

Since e-filing of TDS returns will reduce the voluminous paperwork involved in filing of paper TDS returns and enclosuresthereby significantly reducing the compliance cost of deductors,the e-intermediary i.e. NSDL have been authorized to collect

service charges in respect of the various services being renderedby them to the deductors for upload of E-TDS returns at thefollowing rates: Category of E-TDS return Upload charges Returnshaving records of up to 100 deductee records Rs.25/-Returnshaving records of 101 to 1000 deductee records Rs. 150/-Returnshaving records of more than 1000 deductee records Rs.500/-Service tax if any will be payable by deductors in addition to theabove.

Challan Correction Mechanism

Under OLTAS (On Line Tax Accounting System), the physical challansof all Direct Tax payments received from the deductors / taxpayers aredigitized on daily basis by the collecting banks and the data transmittedto TIN (Tax Information Network) through link cell. At present, the banksare permitted to correct data relating to three fields only i.e. amount,major head code and name. The other errors can be corrected only bythe assessing officers.


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New Procedure of Challan Correction by Banks (For PhysicalChallans):

To remedy this situation, a new Challan Correction Mechanism for

physical challans has been put in place. Under this mechanism, forincome tax payments made on or after 1.9.2011, the following fields canbe got corrected through the concerned bank branch.

Assessment Year Major Head Code Minor Head Code TAN/PAN Total Amount

Nature of payment (TDS Codes)

The Time Window For The Correction Request By Tax Payer Is AsFollows:

S.No Correction required in Field name Period of Correction Request(from Challan Deposit Date)

1. TAN/PAN 7 days

2. Assessment Year 7 days

3. Amount 7 days

4. Other fields (Major Head, Minor head, Nature of payment) within 3months the time window for correction by the bank is 7 days from thedate of receipt of Correction request from the tax-payer.

NSDL E-TDS/TCS Return Preparation Utility (RPU)

Since FY 2003-04, all corporate deductors should file Income tax returnsfor deduction of tax at source (TDS) only in electronic form. Further, fromFY 2004-05, in addition to corporate deductors, filing of TDS returns inelectronic form is mandatory for government deductors also.

Extending the scheme of filing of returns in electronic form to taxcollected at source (TCS), the ITD mandated that with effect from FY

2004-05, all TCSreturns filed by corporate and government collectorsshould be only in electronic form.


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ITD has notified revised file formats for preparation of TDS and TCSreturns in electronic form. Deductors/collectors can prepare the E-TDS/TCS returns as per these file formats using in-house software orany other third party software and submit the same to any of the TIN-

FCs established by NSDL. Deductors/collectors can also directly uploadthe E-TDS/TCS returns through NSDL-TIN website.

NSDL has developed software called E-TDS/TCS Return PreparationUtility (RPU) to facilitate preparation of E-TDS/ TCS returns. This is afreely downloadable MS excel based utility. Separate utilities areavailable for preparation of each type of return.

RPU for Annual Returns: These utilities can be used to prepare E-

TDS/TCS returns up to FY 2004-05. These utilities can be used forpreparation of original or revised annual returns.

RPU for Annual Returns

These utilities can be used to prepare E-TDS/TCS returns up to FY2004-05. These utilities can be used for preparation of original or revisedannual returns.

E-TDS RPU (ver. 4.80) for Form 24



e-TCS RPU (ver. 4.90) for Form 27E

RPU for Quarterly Returns

From FY 2005-06 onwards, TDS/TCS returns have to be filed everyquarter (i.e. quarterly statements). The following utilities can be used toprepare regular quarterly statements:

NSDL RPU version 3.5 for quarterly E-TDS/TCS statements from FY2007-08Download RPU version 3.5
https://www.tin-nsdl.com/download/e-tds/eTDSRPUForm24_ver4.80.ziphttps://www.tin-nsdl.com/download/e-tds/eTDSRPUForm24_ver4.80.ziphttps://www.tin-nsdl.com/download/e-tds/eTDSRPUForm26_ver4.80.ziphttps://www.tin-nsdl.com/download/e-tds/eTDSRPUForm26_ver4.80.ziphttps://www.tin-nsdl.com/download/e-tds/eTDSRPUForm27_ver4.80.ziphttps://www.tin-nsdl.com/download/e-tds/eTDSRPUForm27_ver4.80.ziphttps://www.tin-nsdl.com/download/e-tds/eTCSRPUForm27E_ver4.90.ziphttps://www.tin-nsdl.com/download/e-tds/eTCSRPUForm27E_ver4.90.ziphttps://www.tin-nsdl.com/download/e-tds/e-TDS_RPU_3.5.ziphttps://www.tin-nsdl.com/download/e-tds/e-TDS_RPU_3.5.ziphttps://www.tin-nsdl.com/download/e-tds/e-TDS_RPU_3.5.ziphttps://www.tin-nsdl.com/download/e-tds/e-TDS_RPU_3.5.ziphttps://www.tin-nsdl.com/download/e-tds/eTCSRPUForm27E_ver4.90.ziphttps://www.tin-nsdl.com/download/e-tds/eTDSRPUForm27_ver4.80.ziphttps://www.tin-nsdl.com/download/e-tds/eTDSRPUForm26_ver4.80.ziphttps://www.tin-nsdl.com/download/e-tds/eTDSRPUForm24_ver4.80.zip


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Features Of RPU 3.5

Correction Statements

Corrections required in the regular quarterly statements can be furnishedby submitting a correction statement in the prescribed format. Thefollowing utilities can be used to prepare correction quarterly statements:

NSDL RPU version 3.5 for quarterly E-TDS/TCS statements from FY2007-08Download RPU version 3.5

Features of RPU 3.5

Feedback Form

Guidelines for usage of these RPUs are provided in the respectiveutilities. The users are advised to read these guidelines carefully beforethe utility is used to prepare the returns. Users may ensure that theydownload the latest version of the utility at the time of preparation ofreturn.

Users must pass the E-TDS/ TCS return file generated using RPU

through theFile Validation Utility (FVU)to ensure format levelaccuracy of the file. This utility is also freely downloadable from NSDLTIN website. In case the E-TDS/TCS return contains any errors, usershould rectify the same in the excel utility itself. After rectifying theerrors, user should pass the rectified E-TDS/ TCS return through theFVU. This process should be continued till an error free E-TDS/ TCSreturn is generated.

Disclaimer:

These utilities have been developed by NSDL for smalldeductors/collectors and returns exceeding 20,000 deductee recordsshould not be prepared using this utility. NSDL does not warrant anyaccuracy of the output file generated using any of these utilities. Allusers are advised to use latest FVU and check the format levelcorrectness of the file before submitting the same to TIN-FC. In caseFVU reports any error in the file, then the users are advised to rectify thesame. Further, deductors/collectors are advised to ensure that the E-

TDS/TCS returns are filed before the last date specified by Income Tax
https://www.tin-nsdl.com/download/e-tds/Key_features_RPU_3.5.dochttps://www.tin-nsdl.com/download/e-tds/Key_features_RPU_3.5.dochttps://www.tin-nsdl.com/download/e-tds/e-TDS_RPU_3.5.ziphttps://www.tin-nsdl.com/download/e-tds/e-TDS_RPU_3.5.ziphttps://www.tin-nsdl.com/download/e-tds/e-TDS_RPU_3.5.ziphttps://www.tin-nsdl.com/download/e-tds/Key_features_RPU_3.5.dochttps://www.tin-nsdl.com/download/e-tds/Key_features_RPU_3.5.dochttps://www.tin-nsdl.com/feedback.phphttps://www.tin-nsdl.com/etds-etcs/eTDS-file-validation-utility.phphttps://www.tin-nsdl.com/etds-etcs/eTDS-file-validation-utility.phphttps://www.tin-nsdl.com/etds-etcs/eTDS-file-validation-utility.phphttps://www.tin-nsdl.com/etds-etcs/eTDS-file-validation-utility.phphttps://www.tin-nsdl.com/feedback.phphttps://www.tin-nsdl.com/download/e-tds/Key_features_RPU_3.5.dochttps://www.tin-nsdl.com/download/e-tds/e-TDS_RPU_3.5.ziphttps://www.tin-nsdl.com/download/e-tds/Key_features_RPU_3.5.doc


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Department. Non-functioning or non availability of this utility may not beconsidered as a reason for inability to file the return before the last date.

E-Return Intermediary:

Income Tax Department (ITD) has launched a new scheme forimproving interface with the taxpayers. This scheme titled "ElectronicFurnishing of Return of Income Scheme, 2007" enables authorizedintermediaries to electronically file Income Tax returns on behalf of thetaxpayers. This scheme is available to any taxpayer who is assessed orassessable to tax.

Income Tax Department (ITD) has launched a new scheme for

improving interface with the taxpayers. This scheme titledElectronic enables authorized intermediaries to electronically file IncomeTax returns on behalf of the taxpayers. This scheme is available to anytaxpayer who is assessed or assessable to tax.

Under this scheme an eligible tax payer at his option furnish the incometax return in electronic form.

Under The Scheme:

Eligible Tax Payer Means:

An eligible tax payer being a company or a firm referred to in clause (a)of provision to sub-rule (3) of rule 12 of the Income-tax Rules, 1962 orany other eligible person.

Composition Scheme:

The provision relating to tax invoice do not apply to a selling dealer whohas opted to avail the composition scheme under the respective stateVAT laws. Thus, a composition scheme dealer cannot issue a taxinvoice.


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VAT Chain under Composition Scheme:

I. Loss to the seller:

If the composition is availed by a dealer then such dealer cannotavail input tax credit In respect of input tax paid. Hence the dealerwill be losing the input tax credit on purchases made by him. Hewill not be able to pass on the benefits of input tax credit, which willadd to the cost of the goods

II. Loss to the purchaser:

The purchaser shall not get any tax credit for the purchases made

by him from the dealer operating under the composition scheme.Therefore, as soon as a dealer opts for the composition scheme,the VAT chain will be broken, and the benefits of tax paid earlierwill not be passed on to the subsequent.

Records:

The following records should be maintained under VAT system:

I. Purchase record

II. Sales record

III. VAT account

IV. Separate record of any exempt sale

Further, the following records should also keep and produced to anofficer:

I. Copies of all invoices issue, in serial number

II. Copies of all credit and debit notes issued, in chronological order

III. All purchases invoices, copies of custom entries, receipts forpayment of customs duty or tax, and credit and debit notesreceived to be filed chronologically either by date of receipt orunder each suppliers name


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IV. Details of the amount of tax charge on each sale or purchases

V. Total of the output tax and the input tax in each period and a nettotal of the tax payable or the excess carried forward, as the case

may be, at the end of each month

VI. Details of goods manufactured and delivered from the factory ofthe taxable person

VII. Details of each supplies of goods from the business premises,unless such details are available at the time of supply in invoicesissued at, or before, that time.

Failure to keep these records may attract penalty. All such recordsshould be preserved for the period specified in respective stateprovision.

No Declaration Form:

Most of the declaration forms that existed before the introduction of VAThave been dispensed with. Use of declaration forms is expected to bestopped completely. Lots of time and energy is wasted by the dealer in

getting declaration forms from the department .there is provision forconcessional sale under the VAT acts since the provision for set- offmakes the input zero-rated. Hence, there will be no need for declarationform.

Returns:

Under VAT laws there are simple forms of returns. Returns are to befiled monthly/quarterly/annually as per the provision of the state

acts/rules. Returns will be accompanied with the payment challans.Some state have devised return cum challan.in these cases the returnsalong with the payment can be filed with the treasury.

A registered dealer may be required to file a monthly/quarterly/annuallyreturn along with the requisite details such as output tax liability, value ofinput tax credit, payment of VAT etc. opportunity may be provided tolodge revised returns.

Every return finished shall be scrutinized expeditiously within theprescribed time limit from the date of filing the return. If any technical


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mistake is detecting on scrutinizing, the dealer shall be required to bepay the deficit approximately.

How to Have Completed Your VAT Return

You should have continued to receive and submit VAT returns in thenormal way - monthly, quarterly or annually. The deadlines for submittingyour VAT returns and making payments were unchanged. For returnperiods that covered both before and after 1 January 2010, you neededto add together the VAT on sales charged at 15 per cent and the VAT onsales charged at 17.5 per cent to work out the total VAT on sales to beincluded in box 1 of your VAT return.

How to have corrected an error on your VAT return

If you discovered that you made an error you could have corrected it inthe normal way by making a voluntary disclosure or correcting it on yournext return .If you made mistakes accounting for the change of rate onyour first VAT Return after the change, HMRC will only seek anadjustment if there was likely to be an overall revenue loss

Returns Filing Procedure Under VATLaws Are Designed With The

Objective Of:

1. Reducing the compliances costs incurred by the businesses incompleting and filing their returns.

2. Encouraging businesses to comply with their obligation to filereturns and pay VAT through the application of penalties in caseof late payment of VAT and late filling of returns.

3. Ensuring the efficient processing of the data included in thereturns.

Income Tax Return:

Required to furnish under section 139 or clause (I) of sub-section (1) ofsection 142 or sub-section (1) of section 148 or section 153A of the Actor return of fringe benefits which he is required to furnish under sub-section (1) or sub-section (2) of section 115WD of the Act for

assessment year2008-09 or any subsequent assessment year, throughthe above-mentioned authorized intermediaries.


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Revise return of income under sub-section (5) of section 139 of the Actor fringe benefits under sub-section (4) of section 115WD of the Act forassessment year under this scheme if he has furnished a return ofincome or return of fringe benefit for that assessment year under this

scheme.

These entities that are authorized to file Income Tax returns in electronicform on behalf of taxpayers are called E-Return Intermediaries. E-ReturnIntermediaries are appointed by ITD.

NSDL has been appointed as the Registrar for processing applicationsfor registration as E-Return Intermediary by eligible entities.

NSDL has setup a web-based facility for onlineregistrationof E-ReturnIntermediaries.

The entities desirous of acting as E-Return Intermediaries maydetermine their eligibility and ensure that they have met the pre-requisites required for submitting the application. The eligibility criteriaand pre-requisites are prescribed by ITD.
https://tin.tin.nsdl.com/eri/Agreement.htmlhttps://tin.tin.nsdl.com/eri/Agreement.htmlhttps://tin.tin.nsdl.com/eri/Agreement.htmlhttps://tin.tin.nsdl.com/eri/Agreement.html


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ITR FORMS:

1 ITR - 1 This form is applicable for individual having income from

salary, pension and interest.

2 ITR - 2 This form is applicable for individual and HUF havingincome from other source which include income otherthan business salary, capital gains and house property.e.g. Lottery, house rising.

3 ITR 3 This form is applicable for individual or HUF havingincome for partnership for partners.

4 ITR- 4 This form is applicable for individual or HUF income frombusiness and profession.

5 ITR- 5 This form is applicable for partnership for association ofperson and body of individual.

6 ITR- 6 This form is applicable for private LTD as well as publiclimited company

7 ITR- 7 This form is applicable for trust, charitable institution,

educational institution, etc.

8 ITR- 8 IT forms for return for fringe benefits

9 ITR V Where the data of the return income/fringe benefits inform ITR-1, ITR -2, ITR -3, ITR-4, ITR-5, ITR-6and ITR-8

transmitted electronically without digital signature.


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Note:-

As per the guidelines issued by the Office of CCA, it is required tocomply with the use of SHA-2 Hash Algorithm and 2048 bit RSA keys for

digital signing. In view of the same, the following pre-requisites need tobe followed:

1. JRE version : SUN-java 1.6_update29 or higher version (32 bit)

2. Client Operating system: Windows XP SP3, Vista Windows 7, Windows2003 with patch for SHA-2.

3. I.E browser version supported: 7, 8 and 9.

4. Safe net or E-token drivers used should be the latest (if applicable)

A Public Sector Company as defined in clause (36A) of section 2 ofthe Act or any other company in which public are substantiallyinterested within the meaning of clause (18) of section 2 of the Actand any subsidiary of those companies which

has a valid Permanent Account Number (PAN)

A Company Incorporated In India, Including A Bank, Having A NetWorth of Rupees One Croreor More Which


A Firm of Chartered Accountants Which


A Firm of Advocates Which


A Firm of Company Secretaries Which



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A Chartered Accountant Who


An Advocate Who


A Company Secretary Who


Tax Return Preparers (Income Tax) Who


A Drawing Or Disbursing Officer (DDO) Of A GovernmentDepartment Who

has a valid Tax Deduction Account Number (TAN)

His entity must have Digital Signature Certificate (Class II or Class III)from any of the licensed Certifying Authorities specified by NSDL(currently TCS, IDRBT, Safe Scrypt, MTNL, n code, e-mudhra and NIC)for the purpose of digitally signing the application and the returnsuploaded online.

The digital certificate must be in the name of the applicant. If the digitalcertificate is in the name of an employee / partner of the applicant, thenan authorization letter by the applicant should be provided on the

letterhead of the applicant to NSDL.

Hardware Requirements

CPU > 500MHz or above

RAM 256 MB or