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Discussion on Value Added Tax,
Karnataka
Badrinath NR
Accretive Business Consulting Private Limited
Accounts, Documentation and Returns
Introduction
Discussion on:
Accounts and documents to be maintained by dealers under the
provisions of Karnataka Value Added Tax Act, 2003
Returns to be filed as prescribed under the Act
Assessment proceedings
Accounts & Documentation
Accounts and Documents
Some questions:
What constitutes books of account?
How should such books be maintained?
What are the formats in which such books are to be maintained?
How should the transactions be recorded in the books of account?
What is the relevance of maintaining the books of account?
Where should be books be kept / stored?
For how long should such books be preserved?
How should adjustments to the entries made, if any be recorded and documented?
Relevant Provisions
The provisions are contained in Chapter IV of the VAT Act
read with Part III of the VAT Rules
Books of Account
Records of purchases, receipts, sales, other disposals,
production, manufacture and stocks
Sales and Purchase Invoices
VAT Account containing details of input and output tax
Credit / Debit Notes
Bills for purchase from unregistered dealers
Copies of contracts entered into with customers
Details of deductions claimed in computation of taxable
turnover
To be recorded as soon as the purchase / sale is made
Maintenance of books of account
Every registered dealer liable to pay tax is required to maintain true and correct
accounts in Kannada, Hindi, English or any of the languages notified by the
Government
Commissioner is empowered to notify registered dealers to maintain accounts
in specified manner
The dealers who maintain accounts and other documents electronically are
required to retain them in electronically readable formats
> Such records shall be maintained in paper printed on a monthly basis
Any changes in manual books to be made under an attestation
> Any changes in books maintained electronically must be supported by a
record of correction
Formats
True and correct account of purchases, receipts, sales, other disposals,
production, manufacture and stocks
> No formats or contents prescribed
Transactional documents (contents prescribed)
> Tax Invoice
> Bill of Sale
> Bill
> Delivery Challan
> Credit / Debit Notes
Registers
> Form VAT 170 prescribed as purchase register
> Other transactions (no formats prescribed)
Registers
Should be comprehensive to
include every detail of receipt or
dispatch of goods
To facilitate reconciliation with
returns / financial records
To identify readily, deviations if
any from routine transactions
To include details which may be
required at the time of assessments
and appeals
To facilitate desk review of
transactions and computation of
taxes including input credits
Registers
Purchase register
Sales register
Returns register
> Purchase returns
> Sales returns
Inter-State non-sale dispatches
(Suggested formats attached to this
presentation)
Other Registers
Works Contracts
Particulars of names and address of the persons for whom
works contracts are executed
Particulars of goods procured (purchase or otherwise) for use in
execution of works contract
Particulars of goods utilised in execution of works contract
Details of payments received in respect of each works contract
Transactional Documents
Tax Invoice
Bill of Sale
Bill
Debit / Credit Notes
Delivery Challans
Sales Invoices
Tax Invoice
Intra-State sale of taxable goods
Intra-State sale of taxable and exempted goods
Other relevant provisions
Exception – if the value is less than the notified amount
Separate provisions for civil works contracts
Invoices to be raised for advance received
Should be raised within 14 days from date of dispatch
Bill of Sale
Intra-State sale of exempted goods
Inter-State sales
Exports
Sales under Composite Scheme
Sales under Special Accounting Scheme
Other Documents
Bill
Intra-State purchases from
unregistered dealers
To be prepared by the buyer of
goods and preserved as part of
books of account
Credit / Debit Notes
Adjustments to price of goods
indicated in the sale / purchase
invoices
Purchase or sales returns
Other Documents
Delivery Challan
In Form VAT 515 (in lieu of Form
VAT 505)
Format, No. of copies, Printing
should be as prescribed
Register in Form VAT 520
Comparison
Sl. No. Contents Tax Invoice Bill of Sale Dr / Cr notes
1 Header BILL OF SALE Nature of document
2 Name and registered address
3 Registration Nos
4 Serial numbering
5 Document date
6 Date of sale
7 Name of the customer
8 Address of the customer
9 Registration no. of the customer
10 Time of sale of goods
11 Description of goods
12 Quantity
13 Amount
14 Rate of tax charged
15 Amount of tax
16 Total amount
17 Signature of authorised personnel
18 No. of copies 2 2 2
19 Indication for no. of copies
20 Tax invoice number
21 Tax invoice date
Recording of Transactions
Guidance Note issued by ICAI for CENVAT Accounting
> Net method
> Gross method
Guidance Note on accounting for State VAT is yet to be issued
Scheme of Entries
Tax component to be identified and captured separately
> Cost of purchase to be proportionately reduced
> Recorded under Current Assets
> Valuation of stock – not to include tax credit
Relevance of Maintenance
In addition to ensuring compliance under law, the maintenance of
books of account would be important for:
> Supporting the deductions to be claimed in computation of
taxable turnover, such as,
Discounts
Labour and other like charges
Sales returns
Inter-State non sale dispatches (stock transfers)
Work executed by sub contractors
> Claim of input tax credits
> Supporting the adjustments to be made in computation of input
tax credits
Storage of Books of Account
Shall be maintained at the place of business of the dealer
> Place of business means any place which is entered in the
certificate of registration
> Where multiple offices / godowns are operated, subsidiary stock
accounts to be maintained for each location
Should be preserved for a period of 5 years from the end of the year to
which it relates
> In cases where assessments are yet to reach finality – till the
completion of such assessments
> Where any appeals are pending – till such time the appeal is heard
and finally disposed off
Other Records
TDS certificate
> Works contractor
Certificate in Form VAT 156
Register in Form VAT 157
> Caterer
Certificate VAT 158
Register VAT 159
CST
Statutory forms prescribed under the CST Act
Form C – Purchase at concessional rate of tax
Form F – Stock Transfers
Form H – Penultimate Exports
Form E1 / E2 – Sale in Transit
To be submitted to the LVO within 3 months from
the end of the relevant quarter
Non-Maintenance of Books
Books of Account / submission of copy of customer contract:
> Not more than Rs. 2,000 if the failure is 1st during the relevant
year
> Rs. 5,000 if the failure is 2nd or subsequent during the relevant year
(+) Rs. 200 per day of default
Tax Invoice:
> Rs. 2,000 or the amount of tax – WEH (if the offence is the 1st during
the relevant year)
> Rs. 5,000 or the amount of tax – WEH (if offence is committed for the
2nd or the subsequent time during the relevant year)
Returns
Relevant Provisions
Monthly Returns:
> Form – VAT 100: Within 20 days from the end of the relevant month
> Form – VAT 120: Within 15 days from the end of the relevant month in case of
composite scheme
Annual Returns:
> Form – VAT 115: Within 60 days from the end of the year
> Form – VAT 135: Within 60 days from the end of the year in case of composite
scheme
Statement of tax deduction at source
> Works contracts – Monthly Statement in Form VAT 125 (20th of the next month)
> Caterers – Monthly Statement in Form VAT 126 (20th of the next month)
Audit Report
> Form VAT 240 – 9 Months from the end of the year
Calendar of due dates attached to this presentation
Filing of Returns
No enclosures / attachments prescribed for the Returns
> Other than statutory forms to be furnished
Due date in case where the last day is a government holiday
> Would be the next working day
Preparation of Returns
Factors for consideration:
All transactions during the relevant month
Application of partial rebating and special rebating scheme
> Reapplication of partial rebating scheme for cumulative figures in
September and March every year
Exemptions / Deductions
> Appropriate disclosure to include in gross and indicate separately
deductions / exemptions
Signature by authorised signatory only
Period for claim of input tax credits / deductions
Input Credits & Deductions
At what point of time can the
claim be made for:
> Input credits
> Deductions from taxable
turnovers Relevant factors:
Recording in books of
account?
Furnishing details in the
relevant returns?
Fulfillment of specified
conditions?
Non Filing by due date
Penalty
Returns & Payment
Upto 5 days
> Rs. 50 / day
Beyond 5 days
> Rs. 250 or Equivalent
Amount of Tax – WEH
Additionally, 10% of the tax due –
payable as penalty
Short Payments
10% of the short payment
> If the short payment is
beyond 5% of the total tax
due
Incomplete Returns
Rs. 50 per day of default
Interest at 1.25% /month or part of the month
- If the omission is rectified by filing of revised return after more than 3 months
from the date on which the tax was due
Due Dates
Monthly Return (Form VAT-100)
Monthly Return (Form VAT-120)
20th
15th
Annual Return (Form VAT 115)
Annual Return (Form VAT 135)
30th May
30th May
Revised Returns
- Monthly
- Annual
6 Months
31st Dec
Remittance of Net Tax 20th
Remittance of TDS 15th / 20th?
Tax on purchases from URDs 20th
Submission of Statutory Forms (CST) 3 Months from the
end of the quarter
Tax Invoice 14 days
Audit Report 31st Dec
Retention of Accounts & other documents 5 years
Other Filings
Final Return in case of closure of business
Declarations / certificates in case of agency transactions
Composite Scheme filings for traders, hoteliers and others
Not discussed in this session
Reconciliation
Statutory records in most cases are maintained as subsidiary
ledgers
Periodic returns are populated based on information contained
in the subsidiary ledgers
Subsidiary ledgers could be decentralised and independent of the
financial records
Calls for periodic reconciliations
Certain Factors
Comprehensiveness to ensure inclusion of all transactions for
the relevant period
Reconciliations to be focussed towards deriving information to
identify areas for applying further substantive checks
All details may not readily be available as part of the financial
accounting system / inventory software
Formats
Certain formats suggested based on inclusive method of
reconciliation using the top down approach
> Sales / Dispatches
> Purchases / Receipts
Attached to this presentation
Assessments
Assessments
Concept of assessment has been done away with under the VAT law
> Assessments are deemed to be completed based on the returns
filed by the dealers
> Exception: Where the Commissioner notifies production of
records / documents before the prescribed authority
If the dealer has multiple places of business within the State:
> With consent of the dealer, the Commissioner may treat each of
such places as a separate unit for the purposes of the VAT law,
including registrations, returns, assessment etc.
> Circumstances in which this may be invoked
Other Provisions
Best Judgement Assessment
If no return/s are filed by the
dealers, the LVO may assess the
dealer to the best of his judgement
based on the information / details
available
If the dealer files a return within 1
month from the date of BJA, the
order may be withdrawn by the
LVO. However, interest and penalty
payable
Re-assessment
If the return furnished by the dealer
understates the tax liability
Reassessment (based on best
judgement) may be made based on
additional evidence available
If any further evidence is discovered,
further reassessments may also be
made
Govt Departments: Upon
inspection, if any details are found to
be incorrect, the Dept to be
directed to rectify the mistake
Timelimits
Assessment
To be completed within 5 years from the end of the tax period
> Tax period would be the relevant month for which the return is
filed
Re-Assessment
To be completed within 3 years from the date of obtaining evidence
for making the reassessment
WEL
Extended period of 10 years would be applicable in case of fraudulent
evasion of taxes
Protective Assessment
If the LVO has reason to believe that the dealer would default in
payment of taxes due on a subsequent date
> LVO may make a protective assessment with the permission of
the JC / Ad C
> Taxes would be payable forthwith
> Order may be withdrawn within 30 days (suo-motu or based on a
application from the dealer)
Rectification
All orders other than the Court / Tribunal may be rectified
> On the basis of an order of the Court
> If such orders are found erroneous or prejudicial to the public
revenue
May be rectified within 3 years from the date of the judgement / order
of the Court
> If the order of the Court states that a different set of provisions
would be applicable to the set of transactions, the limit would be 5
years (notwithstanding the timelimit of 3/5 years prescribed for
assessments)
Thank you
“The best way to predict the future is to invent it”
- Alan Kay
Accretive Business Consulting Private Limited# 112/12, 1st Floor, 11th Cross, 5th Main, MalleswaramBangalore 560 003. INDIAwww.accretiveglobal.com+91 (80) 4151 6187
