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Value Added Tax: Frequently Asked Questions
Value Added Tax: Frequently Asked Questions
1. What is VAT?
VAT is a multi point levy where the tax paid on local purchases from the
registered dealer can be set off against the tax payable on the sale of goods,
other than special goods.
11. Whether dealer registered under Tamil Nadu General Sales Tax
Act, 1959 has to apply for TIN ?
All registered dealers under TNGST Act 1959 whose registration is in force
shall be provided with TIN automatically without any fee. But after receipt of
TIN, the dealers have to file application for obtaining certificate of
registration under VAT. Dealers may get TIN, download application and file
the details of the application online in the websites ‘www.tnsalestax.com, or
www.tnsalestax.gov.in or www.tnvat.gov.in to speed up the process of
registration
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12. How to apply for registration?
On Introduction of VAT, a new dealer shall file an application in the specified
form along with fee as detailed above to the registering authority in whose
jurisdiction, his principal place of business is situated with a sufficiently
stamped self addressed enveloped, with necessary documents required in the
application form.
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1) The dealers who effects second and subsequent sale in the State.
The Act provides tax not exceeding 1% as notified by Government
on the turnover for the above dealers whose total turnover for a
year is less than Rs. 50 lakhs. Government have notified this
rate as 0.5%
2) The Works contractors may opt to pay at compounded rates at 2%
(civil), 4% (others) instead of paying tax at the rate prescribed for
the goods involved.
3) The hotels, restaurants and sweet stalls may opt to pay tax at
compounded rate prescribed in the Act at slab rates where total
turnover is not less than Rs.10 lakhs but not more than Rs.50
lakhs.
No Input tax credit is allowable to those dealers who have opted
for compounded system.
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19. How the returns are to be filed?
Every dealer who is liable to pay tax under this Act shall file return on or
before 20th of the succeeding month to Assessing authority in whose
jurisdiction the principal place of business is located along with statement of
purchases and sales effected by him during the month in the Form specified
in Rules.
Every dealer whose taxable turnover in the preceding year is Two hundred
crores of rupees and above shall file return on or before 12th of succeeding
month along with statement of purchases and sales effected by him during
the month.
The returns shall be filed either electronically or by ICR forms. The returns
so filed shall be accompanied with proof of payment.
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21. How is the assessment made?
All the assessments are self-assessments as all returns filed are to be
accepted. The dealers need not appear before assessing authority or produce
the accounts for annual assessments. The assessing authority shall accept
the returns filed by the dealer and pass assessment order after the
assessment year is over. The orders shall be served on dealers in the manner
prescribed in Rules.
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26. What is input tax?
Input tax is the amount of tax paid on local purchases by a registered dealer
to another registered dealer.
The input tax credit can be adjusted against the tax payable by the
purchasing dealer on his sales.
The dealers are not eligible for input tax credit on all inputs. There are
certain restrictions and conditions on eligibility of input tax credit. They are
given in detail under TNVAT Act, 2006.
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31. How is input tax credit claimed?
Input tax credit shall be claimed only on the basis of original purchase tax
invoice issued by registered selling dealer.
A registered dealer can claim input tax credit on his purchases, if he holds a
valid "Tax Invoice" / bill at the time of furnishing his return to assessing
authority.
32. Whether input tax credit can be claimed , if the original invoice
is lost ?
Yes. It can be claimed on the basis of duplicate / carbon copy of the invoice
obtained from selling dealer.
33. Is this benefit available to the dealers who opt to pay tax at a
Compounded rate?
No.
34. What are the transactions not eligible for input tax credit?
(a) Sale of exempted goods
(b) purchase of goods from outside the State
(c) goods purchased in the course of business, but used for
personal facility of proprietor, partner or director
(d) goods damaged in transit
(e) goods stolen, destroyed or lost
(f) goods sold in the course of inter-state sale without support of C
form
(g) goods transferred to outside the State for sale either by branch
or agent without support of Form F
(h) goods returned
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35. Can a dealer claim Input Tax Credit for goods sold in Inter-
State trade?
Yes. It can be claimed only when those sales are effected to the Registered
dealers of other State against Form C.
38. Whether the goods held in closing stock are eligible for input
tax credit?
Yes. A registered dealer is entitled for input tax credit for goods held in
closing stock on the previous date of the commencement of VAT Act 2006.
The goods should have been purchased within one year prior to
commencement of the Act (closing stock relating to purchases locally made
during the period January 2006 to December 2006) from registered dealer –
where tax amount with rate of tax are shown separately in purchase invoices
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40. What is the procedure to be adopted to claim input tax credit
for the goods held in closing stock ?
A registered dealer who claims input tax credit for the goods held in closing
stock shall furnish details of inventory with details of input tax paid to the
assessing authority within thirty days from the date of the commencement of
the Act along with Photostat copy of the related purchase invoices / bills in
the prescribed form. The dealer can take the credit and deduct it from tax
payable on sale immediately from January 2007. The dealer shall adjust the
credit within six months. After adjustment, if there is tax credit available,
the same shall lapse to Government, after six months. The assessing
authority, after receipt of inventory and after verification of the genuineness
of the claim shall pass order determining the quantum of input tax credit
eligible for the dealer within 3 months.
Capital goods are, in general, the movable assets like Plant and machinery
used in industry, for manufacture of goods ,but do not mean goods (stock-
in- trade) for sale.
products;
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above;
g) Storage tanks.
43. Are capital goods held in closing stock eligible for input tax
Credit ?
No.
44. Will there be Input Tax credit for all Capital Goods?
Yes, but not for all. Goods notified by the Government are not eligible for
Input Tax Credit which are under the negative list and not eligible for the
Capital Goods purchased before 1.1.2007
45. How the Input Tax Credit-has to be claimed and availed for
Capital Goods?
Every registered dealer while submitting monthly returns to the assessing
authority/can claim the Input Tax Credit paid for all local purchases made
from registered dealers on the basis of Original Tax Invoices in those returns
itself for Capital Goods, after the commencement of commercial production.
They can deduct the same from the Output tax, if any, payable on the local
sales or inter-State sales in those monthly returns. In the first year of
commencement of commercial production, 50% of the input tax credit not
exceeding 50% can be availed and the rest in the second or third year. But
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fees condition is not applicable to parts and accessories. At the end of the
third year, any credit not availed will be lapsed to Government.
No. Input Tax credit is not available for Capital Goods used for manufacture
of goods which are exempted from tax.
47. Will there be Input Tax credit for Capital Goods used in Lease
or Works Contract?
Yes, but not for the dealers who have opted to pay tax under compounding
system.
(1) Input tax credit was availed but subsequently the related goods
have been stolen or damaged or destroyed.
(2) Input tax credit was claimed but subsequently it has been detected
that related purchases are from bogus traders (bill traders).
(3) Input tax credit was availed but related goods have been given as
free sample or gift to others.
(4) Input tax credit availed but subsequently the related goods are
used to provide facility to the proprietor / partner / director. of the concern.
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51. How will the refund be issued to the exporters (dealers who
effect zero rate sale)
The dealer who claims refund due to zero rate sales may file an application in
Form D1 to the assessing authority along with copies of the purchase
invoices of related goods. After verification the assessing authority will issue
refund within 90 days from the date of receipt of application in Form D1.
If the excess amount is not refunded within ninety days, whatever may be
the reason, the assessing authority will issue refund along with interest at
the rate prescribed in the Act. If the dealers, do not claim refund within 180
days from the date of export or before the end of the financial year,
whichever is later, the amount to be refunded shall lapse to Government.
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56. What are the distinct features under the VAT Act?
Self-assessment without conditions, One time registration without renewal,
non-changing TIN irrespective of change of place of business, non-
production of accounts annually for the purpose of assessment, simplified low
rate structure, removal of salesmen permit, Input Tax Credit, abolition of
additional levies like SC, AST, RST, self-declaration for Industrial Inputs in
lieu of Form XVII, Input Tax Credit for Capital goods and opening stock, and
refund for exporters (zero rate sellers) are the distinct features under the
VAT Act.
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