Field Exposure on One Year Post Graduate Diploma in Accountancy (With Computrized Accounts & Taxation )Sudesh Kumar

8/21/2019 Field Exposure on One Year Post Graduate Diploma in Accountancy (With Computrized Accounts & Taxation )Sudes

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What is Activities of Taxation and VAT its Activities 1

A

FIELD EXPOSURE ON

What is Activities Of Taxation and VAT its Activities

Submitted to

Board Of Technical Education, U.P Lucknow, For The Fulfillment Of theRequirement Of One Year Post Graduate Diploma In Accountancy (With

Computerized Accounts and Taxation),Under Multi Point Entry & Credit System.

BATCH-2013-14

Prepared By: Under the Guidance of

SUDESH KUMAR Dr.N.U. Siddiqui

A Student of One Year Post Graduate Head of Department Accountancy.

Diploma in Accountancy (with Computerzed Accounts & Taxation )

DEPARTMENT OF ACCOUNTANCY (WITH COMPUTERISED ACCOUNTS & TAXATION),

GOVERNMENT POLYTECHNIC, KANPUR

M0123213046SPN NO. :-


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ACKNOWLEDGEMENT

This Project Report file is submitted by the partial fulfillment ofthe requirement of One Year Post Graduate Diploma in Accountancy

(with Computerized Accounts and Taxation ) of Govt. Polytechnic ,

Kanpur , under the Board Technical Education , Lucknow . Under multi

point entry & credit system.

At first I want to give full gratitude to be pleasing of God to give

me this challenging and prospective carrier and also made me bale to

complete this project report .

I am under obligation to Er. F.R. Khan , The Principle of Govt.

Polytechnic , Kanpur. He is kind enough . He always encouraged me to

come on this stage and he created the best atmosphere to study in the

college .

I am very grateful that I find Dr. N.U. Siddiqui ,he is the Head of

Department Accountancy . He is very gentle , very polite and very

sincere to his duty . He always takes care of the students . I am very

impressive with him that I can say he is the second form of God . He

always motivated me and he helped a lot to prepare this project file. He

gives positive guide line from time to time to go a head in my life . He is

the best guide for me .


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Again I am very thankful to my respected Honourable Teachers Mr.

Rajeev Kumar, Mr. Atul Agarwal .They have a lot of experience

about Accounting . They are also very kind . They provided me the

important matter which is related with my topic . and gives good tips.

Again I Would like to thank Chaudhary Pandiya & Co. Ajeet

Kumar pandiya , He is the Chartered Accountant there he trained me

one month and within this time he gave good guide line to prepare this

project file and good advices.

Once again I want to mentioned some persons they are also the

main parts of this project as my parents, They are no more in this world

but I feel their bless on the every moment of my life . My elder sister,

Mrs. Rakesh Devi and my brother-in-law, Mr. Ombeer Singh ,They

always support me and there is an important role of them to prepare this

project file. And I am also thankful to our friends Mr.Anirudha Kr.

Yadav, Mr. Ajeet Kumar Pandey and others they supported me.

Lastly, again I thankful to my respected Sir Dr. N.U Siddiqui.

(SUDESH KUMAR)

Place: Kanpur U.P One year P. G. Diploma in Accountancy

Date : /07 /2014 (with Computerized Accounts & Taxation )

Government Polytechnic, Kanpur

SPN-M0123213046


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KANPUR208002 (U.P)

Principals Certificate

This is certify that Project Report On Field Exposure has

been submitted by Sudesh Kumaris a student of P.G. Diplomain Accountancy (with computerized Accounts & Taxation) at

Govt. Polytechnic, Kanpur to One Year P.G. Diploma in

Accountancy. Department of this institute in partial fulfilment

for the P.G. Diploma in Accountancy, U.P. Technical Education

Board.

I wish him every success in days to come .

(Er. F.R. Khan)

Principal

Place : Kanpur (U.P.) Government Polytechnic

Date : /07/2014 Kanpur-208002 (U.P.)


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KANPUR208002 (U.P)

Guides Certificate

This is certify that Project Report On Field Exposure

has been submitted by Sudesh KumarS/o Tallu Ramin partial

fulfilment of the requirement One Year P.G. Diploma in

Accountancy (with computerized Accounts & Taxation), under

multi point entry & credit system of Board Of Technical

Education Lucknow, U.P. at Govt. Polytechnic, Kanpur . His

topic is What is Activities of Taxation and VAT its Activitiesand he prepared under my guidance and advice.

(Dr. N.U. Siddiqui)

H.O.D. Accountancy

Place : Kanpur(U.P.) Government Polytechnic

Date : /07/2014 Kanpur-208002 (U.P.)


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Activities Of Taxation

What is Taxation

Taxation refers to the act of a taxing authority actually levying tax.

Taxation as a term applies to all types of taxes, from income to gift to

estate taxes. It is usually referred to as an act; any revenue collected is

usually called "taxes."

Taxation can also refer to taxes as an abstract concept, an actual

dollar amount of tax that has been levied or the material funds that have

been received as taxes. Although all of these definitions are technically

correct, the one listed above is the most common. Taxation is one of the

primary powers of government over the people.

Definition

A fee charged ("levied") by a government on aproduct, income,

service oractivity is called taxation.
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If tax is levieddirectly onpersonal orcorporate income, then it is a

direct tax.

If tax is levied on theprice of a good or service, then it is called an

indirect tax.

TAXATION SYSTEM IN INDIA:

India has a well-developed tax structure with clearly demarcated

authority between Central and State Governments and local bodies.

Central Government levies taxes on income (except tax on agricultural

income, which the State Governments can levy), customs duties, central

excise and service tax.

Value Added Tax (VAT), stamp duty, state excise, land revenue

and profession tax are levied by the State Governments.

Local bodies are empowered to levy tax on properties, octroi and

for utilities like water supply, drainage etc.
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Indian taxation system has undergone tremendous reforms during

the last decade. The tax rates have been rationalized and tax laws have

been simplified resulting in better compliance, ease of tax payment and

better enforcement. The process of rationalization of tax administration

is ongoing in India.

Direct Taxes

In case of direct taxes (income tax, wealth tax, etc.), the burden

directly falls on the taxpayer.

Income tax

According to Income Tax Act 1961, every person, who is an

assessee and whose total income exceeds the maximum exemption limit,

shall be chargeable to the income tax at the rate or rates prescribed in the

Finance Act. Such income tax shall be paid on the total income of the

previous year in the relevant assessment year.


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Assessee means a person by whom (any tax) or any other sum of

money is payable under the Income Tax Act, and includes -

(a) Every person in respect of whom any proceeding under the

Income Tax Act has been taken for the assessment of his income (or

assessment of fringe benefits) or of the income of any other person in

respect of which he is assessable, or of the loss sustained by him or by

such other person, or of the amount of refund due to him or to such other

person;

(b) Every person who is deemed to be an assessee under any

provisions of the Income Tax Act;

(c) Every person who is deemed to be an assessee in default under

any provision of the Income Tax Act.

Where a person includes:

Individual

Hindu Undivided Family (HUF)

Association of persons (AOP)


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Body of individuals (BOI)

Company

Firm

A local authority and,

Every artificial judicial person not falling within any of the

preceding categories.

Income tax is an annual tax imposed separately for each assessment

year (also called the tax year). Assessment year commences from 1st

April and ends on the next 31st March.

The total income of an individual is determined on the basis of his

residential status in India. For tax purposes, an individual may be

resident, nonresident or not ordinarily resident.

Resident

An individual is treated as resident in a year if present in India:


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1. For 182 days during the year or

2. For 60 days during the year and 365 days during the preceding four

years. Individuals fulfilling neither of these conditions are nonresidents.

(The rules are slightly more liberal for Indian citizens residing abroad or

leaving India for employment abroad.)

Resident but not Ordinarily Resident

A resident who was not present in India for 730 days during the

preceding seven years or who was nonresident in nine out of ten

preceding years is treated as not ordinarily resident.

Non-Residents

Non-residents are taxed only on income that is received in India or

arises or is deemed to arise in India. A person not ordinarily resident is

taxed like a non-resident but is also liable to tax on income accruing

abroad if it is from a business controlled in or a profession set up in

India.


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Non-resident Indians (NRIs) are not required to file a tax return if

their income consists of only interest and dividends, provided taxes due

on such income are deducted at source. It is possible for non-resident

Indians to avail of these special provisions even after becoming residents

by following certain procedures laid down by the Income Tax act

Status Indian Income Foreign Income

Resident and ordinarily resident Taxable Taxable

Resident but not ordinary resident Taxable Not taxable

Non-Resident Taxable Not taxable


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India Income tax slabs for Women 2014-2015:

Income tax slab (in Rs.) Tax

0 to 2,00,000 No tax

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

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

Above 10,00,000 30%

India Income tax slabs for Senior citizens 2014-2015 :


0 to 2,50,000 No tax

2,50,001 to 5,00,000 10%

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

Above 10,00,000 30%


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Income tax slabs 2014-2015 for very senior citizens

(Aged 80 and above):


0 to 5,00,000 No tax

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

Above 10,00,000 30%

-In addition an rebate of Rs 2000 will be available for income less than

Rs 5 lakhs.

- Income above 1 crore to attract 10% tax surcharge.

Personal Income Tax:

Personal income tax is levied by Central Government and is

administered by Central Board of Direct taxes under Ministry of Finance

in accordance with the provisions of the Income Tax Act.


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Rates of Withholding Tax:

To view tax rates applicable in India under Avoidance of Double

Taxation (ADT) agreement Tax upon Capital Gains

Corporate tax:

Definition of a company

A company has been defined as a juristic person having an

independent and separate legal entity from its shareholders. Income of

the company is computed and assessed separately in the hands of the

company. However the income of the company, which is distributed to

its shareholders as dividend, is assessed in their individual hands. Such

distribution of income is not treated as expenditure in the hands of

company; the income so distributed is an appropriation of the profits of

the company.


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Corporate sector tax:

The taxability of a company's income depends on its domicile.

Indian companies are taxable in India on their worldwide income.

Foreign companies are taxable on income that arises out of their Indian

operations, or, in certain cases, income that is deemed to arise in India.

Royalty, interest, gains from sale of capital assets located in India

(including gains from sale of shares in an Indian company), dividends

from Indian companies and fees for technical services are all treated as

income arising in India. Current rates of corporate tax. Different kinds of

taxes relating to a company

Minimum Alternative Tax (MAT):

Normally, a company is liable to pay tax on the income computed

in accordance with the provisions of the income tax Act, but the profit

and loss account of the company is prepared as per provisions of the

Companies Act. There were large number of companies who had book

profits as per their profit and loss account but were not paying any tax


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because income computed as per provisions of the income tax act was

either nil or negative or insignificant. In such case, although the

companies were showing book profits and declaring dividends to the

shareholders, they were not paying any income tax. These companies are

popularly known as Zero Tax companies. In order to bring such

companies under the income tax act net, section 115JA was introduced

w.e.f assessment year 1997-98.

Fringe Benefit Tax (FBT):

The Finance Act, 2005 introduced a new levy, namely Fringe

Benefit Tax (FBT) contained in Chapter XIIH (Sections 115W to

115WL) of the Income Tax Act, 1961.

Fringe Benefit Tax (FBT) is an additional income tax payable by

the employers on value of fringe benefits provided or deemed to have

been provided to the employees. The FBT is payable by an employer

who is a company; a firm; an association of persons excluding trusts/a

body of individuals; a local authority; a sole trader, or an artificial


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juridical person. This tax is payable even where employer does not

otherwise have taxable income. Fringe Benefits are defined as any

privilege, service, facility or amenity directly or indirectly provided by

an employer to his employees (including former employees) by reason

of their employment and includes expenses or payments on certain

specified heads.

The benefit does not have to be provided directly in order to attract

FBT. It may still be applied if the benefit is provided by a third party or

an associate of employer or by under an agreement with the employer.

Dividend Distribution Tax (DDT):

Under Section 115-O of the Income Tax Act, any amount declared,

distributed or paid by a domestic company by way of dividend shall be

chargeable to dividend tax. Only a domestic company (not a foreign

company) is liable for the tax. Tax on distributed profit is in addition to

income tax chargeable in respect of total income. It is applicable

whether the dividend is interim or otherwise. Also, it is applicable


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whether such dividend is paid out of current profits or accumulated

profits.

The tax shall be deposited within 14 days from the date of

declaration, distribution or payment of dividend, whichever is earliest.

Failing to this deposition will require payment of stipulated interest for

every month of delay under Section115-P of the Act.

Rate of dividend distribution tax to be raised from 12.5 per cent to

15 per cent on dividends distributed by companies; and to 25 per cent on

dividends paid by money market mutual funds and liquid mutual funds

to all investors.

Banking Cash Transaction Tax (BCTT):

The Finance Act 2005 introduced the Banking Cash Transaction

Tax (BCTT) w.e.f. June 1, 2005 and applies to the whole of India except

in the state of Jammu and Kashmir.BCTT continues to be an extremely

useful tool to track unaccounted monies and trace their source and


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destination. It has led the Income Tax Department to many money

laundering and hawala transactions.

Wealth Tax:

Wealth tax, in India, is levied under Wealth-tax Act, 1957. Wealth tax

is a tax on the benefits derived from property ownership. The tax is to be

paid year after year on the same property on its market value, whether or

not such property yields any income.

Under the Act, the tax is charged in respect of the wealth held during

the assessment year by the following persons: -

Individual

Hindu Undivided Family (HUF)

Company

Chargeability to tax also depends upon the residential status of the

assessee same as the residential status for the purpose of the Income Tax

Act.


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Tax Rebates for Corporate Tax:

The classical system of corporate taxation is followed in India

Domestic companies are permitted to deduct dividends received

from other domestic companies in certain cases.

Inter Company transactions are honored if negotiated at arm's

length.

Special provisions apply to venture funds and venture capital

companies.

Long-term capital gains have lower tax incidence.

There is no concept of thin capitalization.

Liberal deductions are allowed for exports and the setting up on

new industrial undertakings under certain circumstances.

There are liberal deductions for setting up enterprises engaged in

developing, maintaining and operating new infrastructure facilities

and power-generating units.


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Capital Gains Tax:

A capital gain is income derived from the sale of an investment. A

capital investment can be a home, a farm, a ranch, a family business,

work of art etc. In most years slightly less than half of taxable capital

gains are realized on the sale of corporate stock. The capital gain is the

difference between the money received from selling the asset and the

price paid for it.

Capital gain also includes gain that arises on "transfer" (includes

sale, exchange) of a capital asset and is categorized into short-term gains

and long-term gains.

The capital gains tax is different from almost all other forms of

taxation in that it is a voluntary tax. Since the tax is paid only when an

asset is sold, taxpayers can legally avoid payment by holding on to their

assets--a phenomenon known as the "lock-in effect."


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The scope of capital asset is being widened by including certain

items held as personal effects such as archaeological collections,

drawings, paintings, sculptures or any work of art. Presently no capital

gain tax is payable in respect of transfer of personal effects as it does not

fall in the definition of the capital asset. To restrict the misuse of this

provision, the definition of capital asset is being widened to include

those personal effects such as archaeological collections, drawings,

paintings, sculptures or any work of art. Transfer of above items shall

now attract capital gain tax the way jewellery attracts despite being

personal effect as on date.

Double Taxation Avoidance Agreement (DTAA):

List of countries with which India has signed Double Taxation

Avoidance Agreement :

DTAA Comprehensive Agreements - (With respect to taxes on

income)
http://law.incometaxindia.gov.in/DIT/intDtaa.aspxhttp://law.incometaxindia.gov.in/DIT/intDtaa.aspxhttp://law.incometaxindia.gov.in/DIT/intDtaa.aspxhttp://law.incometaxindia.gov.in/DIT/intDtaa.aspxhttp://law.incometaxindia.gov.in/DIT/intDtaa.aspxhttp://law.incometaxindia.gov.in/DIT/intDtaa.aspx


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Indirect Taxation:

Sales tax:

Central Sales Tax (CST):

Central Sales tax is generally payable on the sale of all goods by a

dealer in the course of inter-state trade or commerce or, outside a state

or, in the course of import into or, export from India.

The ceiling rate on central sales tax (CST), a tax on inter-state sale

of goods, has been reduced from 4 per cent to 3 per cent in the current

year.

Value Added Tax (VAT):

VAT is a multi-stage tax on goods that is levied across various

stages of production and supply with credit given for tax paid at each

stage of Value addition. Introduction of state level VAT is the most


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significant tax reform measure at state level. The state level VAT has

replaced the existing State Sales Tax. The decision to implement State

level VAT was taken in the meeting of the Empowered Committee (EC)

of State Finance Ministers held on June 18, 2004, where a broad

consensus was arrived at to introduce VAT from April 1, 2005.

Accordingly, all states/UTs have implemented VAT.

The Empowered Committee, through its deliberations over the years,

finalized a design of VAT to be adopted by the States, which seeks to

retain the essential features of VAT, while at the same time, providing a

measure of flexibility to the States, to enable them to meet their local

requirements. Some salient features of the VAT design finalized by the

Empowered Committee are as follows:

The rates of VAT on various commodities shall be uniform for all

the States/UTs. There are 2 basic rates of 4 per cent and 12.5 per

cent, besides an exempt category and a special rate of 1 per cent

for a few selected items. The items of basic necessities have been

put in the zero rate bracket or the exempted schedule. Gold, silver


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and precious stones have been put in the 1 per cent schedule. There

is also a category with 20 per cent floor rate of tax, but the

commodities listed in this schedule are not eligible for input tax

rebate/set off. This category covers items like motor spirit (petrol),

diesel, aviation turbine fuel, and liquor.

There is provision for eliminating the multiplicity of taxes. In fact,

all the State taxes on purchase or sale of goods (excluding Entry

Tax in lieu of Octroi) are required to be subsumed in VAT or made

VATable.

Provision has been made for allowing "Input Tax Credit (ITC)",

which is the basic feature of VAT. However, since the VAT being

implemented is intra-State VAT only and does not cover inter-

State sale transactions, ITC will not be available on inter-State

purchases.

Exports will be zero-rated, with credit given for all taxes on inputs/

purchases related to such exports.

There are provisions to make the system more business-friendly.

For instance, there is provision for self-assessment by the dealers.


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Similarly, there is provision of a threshold limit for registration of

dealers in terms of annual turnover of Rs 5 lakh. Dealers with

turnover lower than this threshold limit are not required to obtain

registration under VAT and are exempt from payment of VAT.

There is also provision for composition of tax liability up to annual

turnover limit of Rs. 50 lakh.

Regarding the industrial incentives, the States have been allowed

to continue with the existing incentives, without breaking the VAT

chain. However, no fresh sales tax/VAT based incentives are

permitted. Road map to wards GST

The Empowered Committee of State Finance Ministers has been

entrusted with the task of preparing a roadmap for the introduction

of national level goods and services tax with effect from 01 April

2007.The move is towards the reduction of CST to 2 per cent in

2008, 1 per cent in 2009 and 0 per cent in 2010 to pave way for the

introduction of GST (Goods and Services Tax).


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Excise Duty:

Central Excise duty is an indirect tax levied on goods

manufactured in India. Excisable goods have been defined as those,

which have been specified in the Central Excise Tariff Act as being

subjected to the duty of excise.

There are three types of Central Excise duties collected in India

namely

Relief to readymade garment industry. In case of cotton, zero

excise duty at fibre stage also. In case of spun yarn made of man

made fibre, duty of 12 percent at the fibre stage.

Handmade carpets and textile floor coverings of coir and jute

totally exempted from excise duty.

To provide relief to ship building industry, ships and vessels

exempted from excise duty. No CVD on imported ships and

vessels.


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Specific excise duty on cigarettes increased by about 18 percent.

Similar increase on cigars, cheroots and cigarillos.

Excise duty on SUVs increased from 27 to 30 percent. Not

applicable for SUVs registered as taxies.

Excise duty on marble increased from USD 0.55 per square meter

to USD 1.10 per square meter.

Proposals to levy 4 percent excise duty on silver manufactured

from smelting zinc or lead.

Duty on mobile phones priced at more than USD 36.78 raised to 6

percent.

MRP based assessment in respect of branded medicaments of

Ayurveda, Unani,Siddha, Homeopathy and bio-chemic systems of

medicine to reduce valuation disputes.


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Basic Excise Duty:

This is the duty charged under section 3 of the Central Excises and

Salt Act,1944 on all excisable goods other than salt which are produced

or manufactured in India at the rates set forth in the schedule to the

Central Excise tariff Act,1985.

Additional Duty of Excise:

Section 3 of the Additional duties of Excise (goods of special

importance) Act, 1957 authorizes the levy and collection in respect of

the goods described in the Schedule to this Act. This is levied in lieu of

sales Tax and shared between Central and State Governments. These are

levied under different enactments like medicinal and toilet preparations,

sugar etc. and other industries development etc.


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Special Excise Duty:

As per the Section 37 of the Finance Act,1978 Special excise Duty

was attracted on all excisable goods on which there is a levy of Basic

excise Duty under the Central Excises and Salt Act,1944.Since then each

year the relevant provisions of the Finance Act specifies that the Special

Excise Duty shall be or shall not be levied and collected during the

relevant financial year.

Customs Duty:

Custom or import duties are levied by the Central Government of

India on the goods imported into India. The rate at which customs duty

is leviable on the goods depends on the classification of the goods

determined under the Customs Tariff. The Customs Tariff is generally

aligned with the Harmonised System of Nomenclature (HSL).

In line with aligning the customs duty and bringing it at par with

the ASEAN level, government has reduced the peak customs duty from


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12.5 per cent to 10 per cent for all goods other than agriculture products.

However, the Central Government has the power to generally exempt

goods of any specified description from the whole or any part of duties

of customs leviable thereon. In addition, preferential/concessional rates

of duty are also available under the various Trade Agreements.

Period of concession available for specified part of electric and

hybrid vehicles extended upto 31 March 2015.

Duty on specified machinery for manufacture of leather and leather

goods including footwear reduced from 7.5 to 5 percent.

Duty on pre-forms precious and semi-precious stones reduced from

10 to 2 perent.

Export duty on de-oiled rice bran oil cake withdrawn.

Duty of 10 percent on export of unprocessed ilmenite and 5

percent on export on ungraded ilmenite.

Concessions to air craft maintenaince, repair and overhaul (MRO)

industry.


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Duty on Set Top Boxes increased from 5 to10 percent.

Duty on raw silk increased from 5 to 15 percent.

Duties on Steam Coal and Bituminous Coal equalised and 2

percent custom duty and 2 percent CVD levied on both kinds coal.

Duty on imported luxury goods such as high end motor vehicles,

motor cycles, yachts and similar vessels increased.

Duty free gold limit increased to USD 918.86 in case of male

passenger and USD 1,837.47 in case of a female passenger subject

to conditions.

Service Tax:

Service tax was introduced in India way back in 1994 and started

with mere 3 basic services viz. general insurance, stock broking and

telephone. Today the counter services subject to tax have reached over

100. There has been a steady increase in the rate of service tax. From a

mere 5 per cent, service tax is now levied on specified taxable services


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at the rate of 12 per cent of the gross value of taxable services. However,

on account of the imposition of education cess of 3 per cent, the

effective rate of service tax is at 12.36 per cent.

Maintain stability in tax regime.

Vocational courses offered by institutes affiliated to the State

Council of Vocational Training and testing activities in relation to

agricultural produce also included in the negative list for service

tax.

Exemption of Service Tax on copyright on cinematography limited

to films exhibited in cinema halls.

Proposals to levy Service Tax on all air conditioned restaurant.

For homes and flats with a carpet area of 2,000 sq.ft. or more or of

a value of USD 0.18 million or more, which are high-end

constructions, where the component of services is greater, rate of

abatement reduced from from 75 to 70 percent.


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Out of nearly 1.7 million registered assesses under Service Tax

only 0.7 million file returns regularly. Need to motivate them to

file returns and pay tax dues. A onetime scheme called Voluntary

Compliance Encouragement Scheme proposed to be introduced.

Defaulter may avail of the scheme on condition that he files

truthful declaration of Service Tax dues since 1st October 2007.

Tax proposals on Direct Taxes side estimated to yield to USD

2,444.32 million and on the Indirect Tax side USD 863.68 million.

Good and Services Tax:

A sum of USD 1,653.78 million towards the first instalment of the

balance of CST compensation provided in the budget.

Work on draft GST Constitutional amendment bill and GST law

expected to be taken forward.


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SERVICE TAX RATE CHART FROM

01.07.1994 TO FINANCIAL YEAR 2013-14:

Period

BASIC

RATE %

S.T. HEC Eff rate

01/07/1994 to 13/05/2003 5 0 0 5%

14/05/2003 to 09/09/2004 8 0 0 8%

10/09/2004 to 17/04/2006 10 2 0 12%

18/04/2006 to 10/05/2007 12 2 0 12.24%

11/05/2007 to 23/02/2009 12 2 1 12.36%

24/02/2009 to 31/03/2012 10 2 1 10.30%

01/04/2012 to DATE 12 2 1 12.36%


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Service Tax return due Date for all person :

SERVICE TAX RETURN DUE DATE CHART (GENERAL)

APRIL TO SEPTEMBER 25-Oct

OCTOBER TO MARCH 25-Apr

SERVICE TAX RETURN DUE DATE CHART FY 2012-13

01.04.2012 TO 30.06.2012 25.11.2012

01.07.2012 TO 30.09.2012 15.04.2013

01.10.2012 TO 31.03.2013 25.04.2013

For Life Insurance under Rule 6(7A)(ii) of Service Tax

Rules, 1994

Gross Amount of

Premium Charged

New Rate Old Rate

1st year 3% 1.50%

Subsequent Years 1.50% 1.50%
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Penalty on late filing of service Tax return:

Provided also that where the gross amount ofservice tax payable is nil,

the Central Excise officer may, on being satisfied that there is sufficient

reason for not filing the return, reduce or waive the penalty.

Interest on late payment of service Tax :

The new rate of interest of 18% will be applicable from 1st April,

2011.However interest rate is reduced by 3 % for turnover up to 60 Lacs

Provided that in the case of a service provider, whose value of taxable

services provided in a financial year does not exceed sixty lakh rupees

during any of the financial years covered by the notice issued under sub-

section (3) of section 73A or during the last preceding financial year, as

the case may be, such rate of interest shall be reduced by three percent

per annum.


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So the reduced interest rate of 15% (18%-3%) will be applicable in case

where the value of taxable services provided in a financial year is not

more that Rs. 60 lakh. But this provision will have a limited application

as only to the small service providers but no relief to the large tax payers

has been provided

From old list notified vide notification 36/2004 31/12/2004 three

service has been deleted

1.Telecommunication

2.General Insurance auxiliary

3.Mutual Fund distributor services.

Support services By Govt or Local authority:

Section 65B(49) of Finance Act, 1994 provides the definition of

supportservices. Support services in respect of which service tax is


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payable by business entity receiving such services from government or

local authority are as under:

(i) Infrastructural Support Services;

(ii) Operational support Services;

(iii) Administrative Support Services;

(iv) Logistic Services;

(v) Marketing Services;

(vi) Advertisement Services;

(vii) Promotion Services;

(viii) Construction or Works Contract Services;

(ix) Security;

(x) Testing and Analysis

(xi) Any other support of any kind comprising functions that

entities carry out in ordinary course of operations themselves but


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may obtain as services by outsourcing from others for any

reason whatsoever.

Tax Proposals:

Direct Taxes:

According to the Finance Minister there is a little room to give

away tax revenues or raise tax rates in a constrained economy.

No case to revise either the slabs or the rates of Personal Income

Tax. Even a moderate increase in the threshold exemption will put

hundreds of thousands of Tax Payers outside Tax Net.

However, relief for Tax Payers in the first bracket of USD 0.004

million to USD 0.009 million. A tax credit of USD 36.78 to every

person with total income upto USD 0.009 million.

Surcharge of 10 percent on persons (other than companies) whose

taxable income exceed USD 0.18 million to augment revenues.


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Increase surcharge from 5 to 10 percent on domestic companies

whose taxable income exceed USD 1.84 million.

In case of foreign companies who pay a higher rate of corporate

tax, surcharge to increase from 2 to 5 percent, if the taxabale

income exceeds USD 1.84 million.

In all other cases such as dividend distribution tax or tax on

distributed income, current surcharge increased from 5 to 10

percent.

Additional surcharges to be in force for only one year.

Education cess to continue at 3 percent.

Permissible premium rate increased from 10 percent to 15 percent

of the sum assured by relaxing eligibility conditions of life

insurance policies for persons suffering from disability and certain

ailments.


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Contributions made to schemes of Central and State Governments

similar to Central Government Health Scheme, eligible for section

80D of the Income tax Act.

Donations made to National Children Fund eligible for 100 percent

deduction.

Investment allowance at the rate of 15 percent to manufacturing

companies that invest more than USD 1.84 million in plant and

machinery during the period 1st April 2013 to 31st March 2015.

Eligible date for projects in the power sector to avail benefit

under Section 80- IA extended from 31st March 2013 to 31st

March 2014.

Concessional rate of tax of 15 percent on dividend received by an

Indian company from its foreign subsidiary proposed to continue

for one more year.

Securitisation Trust to be exempted from Income Tax. Tax to be

levied at specified rates only at the time of distribution of income


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for companies, individual or HUF etc. No further tax on income

received by investors from the Trust.

Investor Protection Fund of depositories exempt from Income-tax

in some cases.

Parity in taxation between IDF-Mutual Fund and IDF-NBFC.

A Category I AIF set up as Venture capital fund allowed pass

through status under Income-tax Act.

TDS at the rate of 1 percent on the value of the transfer of

immovable properties where consideration exceeds USD 0.092

million. Agricultural land to be exempted.

A final withholding tax at the rate of 20 percent on profits

distributed by unlisted companies to shareholders through buyback

of shares.

Proposal to increase the rate of tax on payments by way of royalty

and fees for technical services to non-residents from 10 percent to

25 percent.


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Reductions made in rates of Securities Transaction Tax in respect

of certain transaction.

Proposal to introduce Commodity Transaction Tax (CTT) in a

limited way.Agricultural commodities will be exempted.

Modified provisions of GAAR will come into effect from 1st April

2016.

Rules on Safe Harbour will be issued after examing the reports of

the Rangachary Committee appointed to look into tax matters

relating to Development Centres & IT Sector and Safe Harbour

rules for a number of sectors.

Fifth large tax payer unit to open at Kolkata shortly.

A number of administrative measures such as extension of refund

banker system to refund more than USD 918.86, technology based

processing, extension of e-payment through more banks and

expansion in the scope of annual information returns by Income-

tax Department.


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Corporation Tax:

The companies and business organizations in India are taxed on the

income from their worldwide transactions under the provision of Income

Tax Act, 1961. A corporation is deemed to be resident in India if it is

incorporated in India or if its control and management is situated

entirely in India. In case of non resident corporations, tax is levied on the

income which is earned from their business transactions in India or any

other Indian sources depending on bilateral agreement of that country.

Property Tax:

Property tax or 'house tax' is a local tax on buildings, along with

appurtenant land, and imposed on owners. The tax power is vested in the

states and it is delegated by law to the local bodies, specifying the

valuation method, rate band, and collection procedures. The tax base is

the annual ratable value (ARV) or area-based rating. Owner-occupied


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and other properties not producing rent are assessed on cost and then

converted into ARV by applying a percentage of cost, usually six

percent. Vacant land is generally exempted from the assessment. The

properties lying under control of Central are exempted from the taxation.

Instead a 'service charge' is permissible under executive order. Properties

of foreign missions also enjoy tax exemption without an insistence for

reciprocity.

Inheritance (Estate) Tax:

An inheritance tax (also known as an estate tax or death duty) is a

tax which arises on the death of an individual. It is a tax on the estate, or

total value of the money and property, of a person who has died.

Gift Tax:

Gift tax in India is regulated by the Gift Tax Act which was

constituted on 1st

April, 1958. It came into effect in all parts of the

country except Jammu and Kashmir. As per the Gift Act 1958, all gifts


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in excess of Rs. 25,000, in the form of cash, draft, check or others,

received from one who doesn't have blood relations with the recipient,

were taxable. However, with effect from 1st October, 1998, gift tax got

demolished and all the gifts made on or after the date were free from tax.

But in 2004, the act was again revived partially. A new provision was

introduced in the Income Tax Act 1961 under section 56 (2). According

to it, the gifts received by any individual or Hindu Undivided Family

(HUF) in excess of Rs. 50,000 in a year would be taxable.

Leavy of taxes:

Taxes in India are levied by the Central Government and the state

governments. Some minor taxes are also levied by the local authorities

such as the Municipality.

The authority to levy a tax is derived from theConstitution of India

which allocates the power to levy various taxes between the Centre and

the State. An important restriction on this power is Article 265 of the

Constitution which states that "No tax shall be levied or collected except
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by the authority of law." Therefore each tax levied or collected has to be

backed by an accompanying law, passed either by the Parliament or the

State Legislature. In 2010-11, the gross tax collection of the Centre

amounted to 7.92 trillion, with direct tax and indirect tax contributing

56% and 44% respectively.

Purposes and effects

Money provided by taxation has been used by states and their

functional equivalents throughout history to carry out many functions.

Some of these include expenditures on war, the enforcement of law and

public order, protection of property, economic infrastructure (roads,

legal tender, enforcement of contracts, etc.), public works, social

engineering,subsidies, and the operation of government itself. A portion

of taxes also go to pay off the state's debt and the interest this debt

accumulates. Governments also use taxes to fund welfare and public

services. These services can include education systems, health care

systems,pensions for the elderly, unemployment benefits, and public
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transportation. Energy, water and waste management systems are also

commonpublic utilities.Colonial and modernizing states have also used

cash taxes to draw or force reluctant subsistence producers into cash

economies.

VAT (Value Added Tax) its Activities

INTRODUCTION :

Value Added Tax :-

The Value Added Tax (VAT) is a type of indirect tax and is one of

major source of revenue to the state. The VAT system was introduced in

India by replacing the General Sales Tax laws of each state. Presently in

India, out of 35 States and Union Territories, 33 are following this new

system of Sales Taxation. The States/Union territories which are yet to

implement the VAT system are Andaman and Nicobar Islands,

Nagaland and Lakshadweep.

The VAT system of taxation was adopted by Indian States and

Union Territories in the Year 2005 by replacing the General Sales Tax
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Laws with New Value Added Tax Acts and the supporting Value Added

Tax Rules for proper administration and collection of Tax. Each state or

union territory is having its own methods to assess the tax liability and

collection methods from the dealers who fall under the purview of VAT.

The Administration of VAT system was undertaken by the Commercial

Taxes Department of each state along with the Excise and other indirect

taxes. For easy and quick assessment of taxation and prevention of tax

evasion, the department has introduced the

Registration System.

This Registration system of VAT helps in identifying the assesses

who come under the purview of VAT and are liable to collect and pay

VAT. For encouraging the Registration process some benefits or

concessions are given to the dealers.

The Registered dealers are allowed to collect VAT payable by

them from the immediate buyer. They can claim the VAT paid on

purchases made only from a registered dealer. The unregistered dealer

cannot charge VAT on the invoices, so the buying dealer cannot claim


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the VAT amount2 paid as ITC. Also, the unregistered dealers are not

eligible for availing concessions, for e.g., exemptions, which are given

by the government.

The commercial tax department introduced a new method of

levying tax called as the

Composition Scheme

especially after considering the small dealers whose turnover was

low and were unable to maintain the records as per the requirements of

VAT Act. These dealers have to pay a lump sum as VAT on the sale

value of goods. The VAT paid will not be shown in the invoices. They

can account for the total turnover and pay VAT on the same at the end of

their return period.

For Assessing the VAT liability of dealers, each state has

introduced the system of Filing Returns for different tax periods. The tax

periods could be Monthly, Quarterly, Half-yearly and Annual. Each

dealer has to file the Return by specifying the total turnover which is

exempted as well as liable for VAT along with the purchases made and


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tax paid on it with the amount of VAT payable or Input tax credit carried

forward within the stipulated period.

What is VAT ?

VAT is a multi-stage tax levied at each stage of the value addition

chain, with a provision to allow input tax credit (ITC) on tax paid at an

earlier stage, which can be appropriated against the VAT liability on

subsequent sale.

VAT is intended to tax every stage of sale where some value is

added to raw materials, but taxpayers will receive credit for tax already

paid on procurement stages. Thus, VAT will be without the problem of

double taxation as prevalent in the earlier Sales tax laws.

Presently VAT is followed in over 160 countries. The proposed Indian

model of VAT will be different from VAT, as it exists in most parts of

the world. In India, VAT has replaced the earier State sales tax system.

One of the many reasons underlying the shift to VAT is to do away with

the distortions in our earier tax structure that carve up the country into a


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large number of small markets rather than one big common market. In

the earlier sales tax structure tax is not levied on all the stages of value

addition or sales and distribution channel which means the margins of

distributors/ dealers/ retailers at large not subject to sales tax earlier.

Thus, the sales tax pricing structure needs to factor only the single-point

levy component of sales tax and the margins of manufacturers and

dealers/ retailers etc, are worked out accordingly.

internal trade and impeded development of a common market.

prices by an amount higher than what accrues to the exchequer by way

of revenues from it.

Also, there was the problem of multiplicity of rates. All the states,

provided for plethora of rates. These range from one to 25 per cent. This

multiplicity of rates increases the cost of compliance while not really

benefiting revenue.

Heterogeneity prevailed in the structure of tax as well. Apart from

general sales tax, most states used to levy an additional sales tax or a


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surcharge. In addition, the states levied luxury tax as also an entry tax on

the sale of imported goods.

All these practices of heterogeneity in structure as well as rates

cause diversion of trade as well as shifting of manufacturing activity

from one State to another. Further, widespread taxation of inputs relates

to vertical integration of firms, i.e., the earlier system of taxes militated

against ancillary industries and encourages them to produce more and

more of the inputs needed rather than purchase them from ancillary

industries.

The earlier system of commodity taxes is non-neutral. It interferes

with the producers' choice of inputs as well as with the consumers'

choice of consumption, thereby leading to severe economic distortions.

A value-added tax (VAT)

is a form ofconsumption tax.From the perspective of the buyer, it

is a tax on the purchase price. From that of the seller, it is a tax only on

thevalue added to a product, material, or service, from an accounting
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point of view, by this stage of its manufacture or distribution. The

manufacturer remits to the government the difference between these two

amounts, and retains the rest for themselves to offset the taxes they had

previously paid on the inputs.

The purpose of VAT is to generate tax revenues to the government

similar to the corporate income tax or the personal income tax.

The value added to a product by or with a business is the sale price

charged to its customer, minus the cost of materials and other taxable

inputs. A VAT is like asales tax in that ultimately only the end

consumer is taxed. It differs from the sales tax in that, with the latter, the

tax is collected and remitted to the government only once, at the point of

purchase by the end consumer. With the VAT, collections, remittances

to the government, and credits for taxes already paid occur each time a

business in the supply chain purchases products.

How can VAT address these issues:
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Under the VAT regime, due to multi-point levy on the price

including value additions at each and every resale, the margins of either

the re-seller or the manufacturer would be reduced unless the ultimate

price is increased.

VAT would not cause cascading, nor would it cause vertical

integration of firms. Also, it provides total transparency of the incidence

of tax. This is because, VAT is a multi-stage sales tax levied as a

proportion of the value added. Another feature of VAT regime is

discontinuation of the sales tax based incentives to new industrial units.

Until now, all the states were granting such incentives to new industries

in the form of exemption from tax on the purchase of inputs as well as

on the sale of finished goods, sales tax loans and/or tax deferral.

However for the new industrial units to whom the incentive by way of

exemption/ or tax deferrals are already sanctioned under the Sales Tax

Act are continued in the form of refund.

Comparison with sales tax:


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Value-added tax avoids the cascade effect of sales tax by taxing

only the value addedat each stage of production. For this reason,

throughout the world, VAT has been gaining favor over traditional sales

taxes. In principle, VAT applies to all provisions of goods and services.

VAT is assessed and collected on the value of goods or services that

have been provided every time there is a transaction (sale/purchase). The

seller charges VAT to the buyer, and the seller pays this VAT to the

government. If, however, the purchaser is not an end user, but the goods

or services purchased are costs to its business, the tax it has paid for such

purchases can be deducted from the tax it charges to its customers. The

government only receives the difference; in other words, it is paid tax on

thegross margin of each transaction, by each participant in the sales

chain.

In many developing countries such as India, sales tax/VAT are key

revenue sources as high unemployment and low per capita income

render other income sources inadequate. However, there is strong

opposition to this by many sub-national governments as it leads to an
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overall reduction in the revenue they collect as well as of some

autonomy.

In theory sales tax is normally charged on end users (consumers).

The VAT mechanism means that the end-user tax is the same as it would

be with a sales tax. The main difference is the extra accounting required

by those in the middle of the supply chain; this disadvantage of VAT is

balanced by application of the same tax to each member of the

production chain regardless of its position in it and the position of its

customers, reducing the effort required to check and certify their status.

When the VAT system has few, if any, exemptions such as withGST in

New Zealand,payment of VAT is even simpler.

A general economic idea is that if sales taxes are high enough,

people start engaging in widespread tax evading activity (like buying

over the Internet, pretending to be a business, buying at wholesale,

buying products through an employer etc.). On the other hand, total

VAT rates can rise above 10% without widespread evasion because of

the novel collection mechanism However, because of its particular
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mechanism of collection, VAT becomes quite easily the target of

specific frauds likecarousel fraud,which can be very expensive in terms

of loss of tax incomes for states

Implementation:

The standard way to implement a value-added tax involves

assuming a business owes some fraction on the price of the product

minus all taxes previously paid on the good.

By the method of collection, VAT can be accounts-based or

invoice-based.

Under the invoice method of collection, each seller

charges VAT rate on his output and passes the buyer a special invoice

that indicates the amount of tax charged. Buyers who are subject to VAT

on their own sales (output tax), consider the tax on the purchase invoices

as input tax and can deduct the sum from their own VAT liability. The

difference between output tax and input tax is paid to the government (or

a refund is claimed, in the case of negative liability). Under the accounts

based method, no such specific invoices are used. Instead, the tax is
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calculated on the value added, measured as a difference between

revenues and allowable purchases. Most countries today use the invoice

method, the only exception being Japan, which uses the accounts

method.

By the timing of collection, VAT (as well as accounting in general)

can be either accrual or cash based. Cash basis accounting is a very

simple form of accounting. When a payment is received for the sale of

goods or services, a deposit is made, and the revenue is recorded as of

the date of the receipt of fundsno matter when the sale had been made.

Cheques are written when funds are available to pay bills, and the

expense is recorded as of the cheque dateregardless of when the

expense had been incurred. The primary focus is on the amount of cash

in the bank, and the secondary focus is on making sure all bills are paid.

Little effort is made to match revenues to the time period in which they

are earned, or to match expenses to the time period in which they are

incurred.


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Accrual basis accounting matches revenues to the time period in

which they are earned and matches expenses to the time period in which

they are incurred. While it is more complex than cash basis accounting,

it provides much more information about your business. The accrual

basis allows you to track receivables (amounts due from customers on

credit sales) and payables (amounts due to vendors on credit purchases).

The accrual basis allows you to match revenues to the expenses incurred

in earning them, giving you more meaningful financial reports.

Further information:Comparison of cash method and accrual method of

accounting

Registered:

VAT registered means registered for VAT purposes, that is entered

into an official VAT payers register of a country. Both natural persons

and legal entities can be VAT registered. Countries that use VAT have

established different thresholds for remuneration derived by natural

persons/legal entities during a calendar year (or a different period), by
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exceeding which the VAT registration is compulsory. Natural

persons/legal entities that are VAT registered are obliged to calculate

VAT on certain goods/services that they supply and pay VAT into a

particular state budget. VAT registered persons/entities are entitled to a

VAT deduction under legislative regulations of a particular country. The

introduction of a VAT can reduce the cash economy because businesses

that wish to buy and sell with other VAT registered businesses must

themselves be VAT registered.

Examples:

Consider the manufacture and sale of any item, which in this case

we will call awidget.In what follows, the term "gross margin" is used

rather than "profit". Profit is the remainder of what is left after paying

other costs, such as rent and personnel costs.

With VAT, the consumer has paid, and the government received,

the same dollar amount as with a sales tax. The businesses have not

incurred any tax themselves. Their obligation is limited to assuming the
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necessary paperwork in order to pass on to the government the

difference between what they collect in VAT (output tax, an 11th of

their sales) and what they spend in VAT (input VAT, an 11th of their

expenditure on goods and services subject to VAT). However they are

freed from any obligation to request certifications from purchasers who

are not end users, and of providing such certifications to their suppliers.

On the other hand, they incur increased accounting costs for

collecting the tax, which are not reimbursed by the taxing authority. For

example, wholesale companies now have to hire staff and accountants to

handle the VAT paperwork, which would not be required if they were

collecting sales tax instead. If you calculate the added overhead required

to collect VAT, businesses collecting VAT have less profits overall than

businesses collecting sales tax.

The advantage of the VAT system over the sales tax system is that

under sales tax, the seller has no incentive to disbelieve a purchaser who

says it is not a final user. That is to say the payer of the tax has no

incentive to collect the tax. Under VAT, all sellers collect tax and pay it


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to the government. A purchaser has an incentive to deduct input VAT,

but must prove it has the right to do so, which is usually achieved by

holding an invoice quoting the VAT paid on the purchase, and indicating

the VAT registration number of the supplier.

Limitations to the examples:

In the above examples, we assumed that the same number of

widgets were made and sold both before and after the introduction of the

tax. This is not true in real life.

Thesupply and demandeconomic model suggests that any tax

raises the cost of transaction forsomeone, whether it is the seller or

purchaser. In raising the cost, either thedemand curve shifts leftward, or

thesupply curveshifts upward. The two are functionally equivalent.

Consequently, the quantity of a good purchased decreases, and/or the

price for which it is sold increases.
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This shift in supply and demand is not incorporated into the above

example, for simplicity and because these effects are different for every

type of good. The above example assumes the tax is non-distortionary.

Limitations of VAT:
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A VAT, like most taxes, distorts what would have happened

without it. Because the price forsomeone rises, the quantity of goods

traded decreases. Correspondingly, some people are worseoff

by morethan the government is made betteroff by tax income. That is,

more is lost due to supply and demand shifts than is gained in tax. This

is known as adeadweight loss. If the income lost by the economy is

greater than the government's income; the tax is inefficient. It must be

noted that a VAT and a Non-VAT has the same implications on the

microeconomic model.

The entire amount of the government's income (the tax revenue)

may not be a deadweight drag, if the tax revenue is used for productive

spending or has positive externalitiesin other words, governments may

do more than simply consumethe tax income. While distortions occur,

consumption taxes like VAT are often considered superior because they

distort incentives to invest, save and work lessthan most other types of

taxation in other words, a VAT discourages consumption rather than

production.
http://en.wikipedia.org/wiki/Deadweight_losshttp://en.wikipedia.org/wiki/Deadweight_loss


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In the diagram on the right:

Deadweight loss: the area of the triangle formed by the tax income

box, the original supply curve, and the demand curve

Governments tax income: the grey rectangle that says "tax

revenue"

Totalconsumer surplus after the shift: the green area

Totalproducer surplus after the shift: the yellow area

Imports and exports:

Being a consumption tax, VAT is usually used as a replacement for

sales tax. Ultimately, it taxes the same people and businesses the same

amounts of money, despite its internal mechanism being different. There

is a significant difference between VAT andSales Tax for goods that are

imported and exported:

1.VAT is charged for a commodity that is exported while sales tax is

not
http://en.wikipedia.org/wiki/Consumer_surplushttp://en.wikipedia.org/wiki/Producer_surplushttp://en.wikipedia.org/wiki/Sales_Taxhttp://en.wikipedia.org/wiki/Sales_Taxhttp://en.wikipedia.org/wiki/Producer_surplushttp://en.wikipedia.org/wiki/Consumer_surplus


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2.Sales Tax is paid for the full price of the imported commodity,

while VAT is expected to be charged only for value added to this

commodity by the importer and the reseller

This means that, without special measures, goods will be taxed twice

if they are exported from one country that does have VAT to another

country that has sales tax instead. Vice versa, goods that are imported

from a VAT-free country into another country with VAT will result in

no sales tax and only a fraction of the usual VAT. There are also

significant differences in taxation for goods that are being imported /

exported between countries with different systems or rates of VAT.

Sales tax does not have those problems it is charged in the same way

for both imported and domestic goods, and it is never charged twice.

To fix this problem, nearly all countries that use VAT use special

rules for imported and exported goods:

1.All imported goods are charged VAT tax for their full price when

they are sold for the first time


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2.All exported goods are exempted from any VAT payments

For these reasons VAT on imports and VAT rebates on exports form a

common practice approved by the World Trade Organization.

Rebating, returns & billing under VAT

IN CASE OF MANUFACTURER :

(a) Input tax rebate is available only on the purchases made in the

State of Karnataka and on the basis of 'Tax invoice' issued by the dealers

selling goods to the manufacturers. Taxes or duties paid on ot

her types of purchases namely: interstate purchases, interstate

consignment receipt and International imports are not eligible for input

tax rebate.

(b) Output tax is to be charged and collected on the sales made in

the State of Karnataka. However, on the interstate sales taxes under CST

Act could be collected separately or it could be included in the sale price

also. In both these cases of sales, input tax rebate is available only on the


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purchases made in the State of Karnataka. On consignment transfer both

in the State of Karnataka and interstate there is no levy of VAT or CST

as there is no transaction of sale in either of them. (For interstate

consignment of manufactured goods and the goods purchased from

Karnataka and despatched to outside the State the dealer would be

entitled for input rebate paid in excess of 2% on the local purchase). In

case of export of the goods (both direct and indirect) the output tax is

zero and input tax rebate is available only on the purchases made in the

State of Karnataka.

(c) In the monthly return prescribed under VAT Rules namely

Form VAT 100, the above types of purchases and sales are itemized.

The dealer has to extract the details from the books of account and fill

the return form.

(d) The input tax rebate is taken while filing the VAT monthly

return by reducing the output tax. For example: For a given month the

input tax paid by a dealer is say Rs.10,000/- and the output tax payable

is say Rs.20,000/-, then net-tax payable would be Rs.10,000/- (20,000 -


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10,000). Please note that in the tax invoice, VAT is charged and

collected on the entire output value. And in the bill of sale issued under

interstate sales, CST could be collected separately or it could be

included in the sale price also. In case of direct and indirect exports no

taxes are collected but the VAT paid on the locally purchased inputs is

fully rebatable.

IN CASE OF DISTRIBUTOR :

In case of distributors / wholesaler the conditions noted in para

1(a), (b), (c) &(d) above applies with the following modifications: Under

para 1(b) the ''For interstate consignment of goods distributors /

wholesaler would be entitled for input rebate paid in excess of 2% on the

local purchase.''

IN CASE OF RETAILERS :

In case of retailers the conditions noted in para 1(a), (b), (c) &(d)

above applies with the following modifications: Further the retailers

within the turnover limit between 2-15 lakhs could opt for composition


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tax of 1% on their sales. The condition prescribed to remain under

composition scheme is apart from turnover limit, such dealer must not

effect any interstate purchases (except a dealer executing works contract

with certain conditions), must not claim any input tax rebate .


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Composition scheme under VAT Act :

Registration and payment of taxes under VAT Act can be of two

types. First type is the registration and payment of taxes under full VAT

and second type is the registration and payment of taxes under

composition.

The option should be exercised by a dealer, while applying for

registration in the prescribed VAT Form 1. A dealer who is already

registered under full VAT could also opt for composition subjected to

certain condition mentioned hereunder:

Conditions prescribed for registration under composition:-

A dealer applying for registration under composition should fulfill the

following conditions:

1) Dealer should either be a registered dealer under the Act or shall be

making an application for registr

Documents

Field Exposure on One Year Post Graduate Diploma in Accountancy (With Computrized Accounts & Taxation )Sudesh Kumar