About vat

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

03 September 2014 I m a business man I had given a bill with a discount & vat I WS in composite now that person has got a notice saying that the party has not paid vat.wat should I do

Querist : Anonymous

Querist : Anonymous (Querist)

03 September 2014 He is a service provider....he had said I won't claim vat so I gave him the bill...

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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14 July 2024 If you are a service provider and you issued a bill to a customer that included VAT (Value Added Tax) even though you were under the composition scheme and not liable to charge VAT, and now the customer has received a notice regarding non-payment of VAT, here’s what you should consider doing:

### 1. Review the Agreement or Communication

- **Agreement**: Check if there was any agreement or communication with the customer explicitly stating that VAT would not be claimed or charged.

### 2. Documentation and Evidence

- **Bill and Records**: Gather copies of the bill you issued to the customer. Ensure it clearly shows the VAT charged.
- **Correspondence**: If there was any correspondence (emails, messages, etc.) where the customer acknowledged or agreed not to pay VAT, keep records of these communications.

### 3. Contact the Customer

- **Clarify the Situation**: Reach out to the customer to discuss the notice they received and explain the situation regarding the VAT.
- **Provide Documentation**: Share copies of the bill and any relevant communication where it was agreed that VAT would not be claimed.

### 4. Inform Tax Authorities (if necessary)

- **Update Tax Authorities**: If the customer informs you that they received a notice from tax authorities regarding VAT non-payment, consider contacting the tax authorities yourself.
- **Explain the Situation**: Explain that you are under the composition scheme and should not have charged VAT, and provide evidence supporting your claim.

### 5. Legal Advice

- **Consult a Tax Professional**: If the issue escalates or becomes complex, seek advice from a tax professional or a legal advisor who specializes in tax matters. They can provide guidance on how to handle the situation effectively.

### 6. Rectify the Issue

- **Refund or Adjust**: If it is determined that VAT should not have been charged, consider issuing a refund to the customer for the excess amount paid or adjust future transactions accordingly.

### 7. Prevent Future Issues

- **Review Procedures**: Review your billing procedures to ensure compliance with tax laws and agreements with customers in the future.
- **Documentation**: Maintain clear records of agreements and communications regarding taxes to avoid misunderstandings.

### Conclusion

Handling discrepancies regarding VAT charges requires clear communication with the customer and providing documentation to support your position. It’s crucial to act promptly and transparently to resolve the issue and ensure compliance with tax regulations. If in doubt, consulting with a professional advisor can help navigate through the process effectively.

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