Arjuna (fictional character): Krishna, In Maharashtra State, under Maharashtra Value Added Tax Act, VAT audit in FORM 704 is mandatorily required to be carried out and e-filed before 15th January 2014 for the financial year 2012-13. I think there are many beliefs and misbeliefs regarding VAT audit in business community.
Lord Krishna (fictional character): Arjuna, for proper tax assessment and proper compliance of VAT laws, Maharashtra Value Added Tax Act 2002 has made provisions of VAT audit. By which mistakes of dealer are rectified, regulations are complied with and accurate tax is being paid.
Arjuna: To whom VAT Audit is applicable?
Lord Krishna: In Maharashtra State, if the dealer is carrying on business, having turnover of more than Rs. 60 Lakhs, VAT audit is compulsory. Further VAT audit is compulsory for dealer having business of liquor and enjoying benefit of package scheme of incentive irrespective of turnover. Please keep in mind audit under income tax act is mandatory if turnover exceeds Rs. 1 Cr. however in VAT audit is mandatory if turnover exceeds Rs. 60 Lakh.
Arjuna: Krishna, How dealer should prepare for VAT audit?
Lord Krishna: Dealer should keep all purchase and sales invoices. Copies of VAT and CST challans and returns should be kept as per periodicity. Further CST declarations in the C, F, H Forms, etc. should be collected and reconciled with sales. File of notices and / or orders from the sales tax department should be maintained. Further detailed purchase and sales register along with TIN necessarily mentioned, should be maintained. Balance sheet, Tax Audit Report (if applicable), etc. should be kept ready and purchases and sales as per accounts should be reconciled with the purchase and sales register.
Arjuna: As dealer is engaged in various business activities, which mistakes should be avoided while preparing for VAT audit?
Lord Krishna: In VAT audit report, TIN and total amount of transaction during the year with every supplier and customer have to be reported. Therefore as per Act, in every invoice TIN of supplier and customer is necessary. If TIN wise annual sales and purchases are not given accurately, then availing VAT set off or receiving refund becomes difficult.
For e.g. Mr. A purchased goods of Rs. 1 Crore from Mr. B and disclosed in VAT audit report along with TIN of B. Similarly B should mention in his VAT audit report sales of Rs. 1 Cr. along with TIN of A. If accurate information is not furnished sales tax department may initiate legal action and recover tax. Therefore while accounting TIN of the suppliers and customers should be updated in the system so that audit can be carried out easily. Please also note that, A Chartered Accountant or Cost Accountant is authorized to sign the VAT Audit report, hence compliance of Auditing Standards of their respective Institute is must for them.
Arjuna: What will happen if VAT Audit report is not filed within due date?
Lord Krishna: If VAT audit report is not filed within the due date i.e. 15th January 2014 then penalty of 1/10 % of turnover may be levied. Further please note Arjuna, that VAT Audit report is the only Audit Report in India, were there is Penalty for knowingly filing Incomplete Audit Report. Hence please file correct and complete audit report.
Arjuna: Due to this VAT audit report, bogus purchases and sales are now coming to the knowledge of the Sales Tax Department.
Lord Krishna: Arjuna, every dealer should file correct returns and submit accurate information of purchases and sales. Businessman tries to earn money by concealing the turnover and paying less tax. But today in this information technology era, government departments such as sales tax, income tax, service tax, excise etc. share information of tax payers. Due to which today or tomorrow, tax defaulters or tax evaders will come into notice. Hence all taxpayers should earn money honestly but not by the way of tax evasion. In today's world cases of hawala, corruption, scams are increasing. In urge to earn more and more money people are forgetting their integrity and honesty.
Nowadays it's rare to find people working together with a good intention. But while earning money businessman somewhere or other gets trapped and if in any transaction one is misguided or betrayed by other then he will have to suffer for it. Therefore business should be done with good dealers only because in VAT if one has not paid VAT then other will be penalized for it.
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