VAT In sumery for IPCC.

To put it simply, Value Added Tax or VAT for a dealer is the difference of tax payable on

sales effected by him during a tax period after deducting therefrom the tax paid or payable

on purchases effected from within West Bengal, during the same period.

The essence of VAT is in providing set-off through the concept of input tax credit or

rebate for the tax paid or payable by a registered dealer while purchasing goods in West

Bengal (

A.

(a) who is registered under the West Bengal Sales Tax Act, 1994 or Central Sales Tax

Act, 1956; or

(b) who is not registered but is liable to pay tax under the West Bengal Sales Tax Act,

1994 or Central Sales Tax Act, 1956; or

(c) whose gross turnover of sales/purchases or contractual transfer price exceeds

taxable quantum on the day immediately preceding the appointed day,

will be liable to pay VAT from the appointed day, irrespective of quantum of sale, purchase

or works contract under the aforesaid Acts.

Note

2003, comes into force.

B.

(a) being a manufacturer or reseller of goods in West Bengal exceeds turnover of sales

of five lakh rupees in an accounting year will be liable to pay VAT with effect from the

next day; or

(b) is a works contractor and exceeds contractual transfer price of five lakh rupees any

time during an accounting year will be liable to pay VAT with effect from the next day;

or

(c) is an occupier of jute mills or shipper of jute will be liable to pay tax under the VAT

Act with effect from the date of first purchase in West Bengal; or

(d) sells goods brought from outside West Bengal will be liable to pay VAT from the very

first sale; or

(e) is liable to pay tax under Central Sales Tax Act, 1956, will also be liable to pay VAT;

or

(f) is liable to pay tax as works contractor will be liable to pay VAT on all other sales; or

(g) is a transferee of business of a registered dealer (for example acquisition of business

by way of purchase or inheritance or gift), either in part or in full, will be liable to pay

VAT from the date of such transfer; or

(h) gets himself registered voluntarily will be liable to pay VAT from the date of

registration.

Note

amount received or receivable for the transfer of property in goods, (whether as goods or in

any other form) involved in the execution of works contract.

(a) All the dealers registered under the West Bengal Sales Tax Act, 1994 on the day

immediately preceding the day on which the West Bengal Value Added Tax Act,

2003 (hereinafter referred to as the VAT Act) comes into force, will be deemed to

have been registered under the VAT Act from the very first day. These dealers,

however, are required to furnish certain information in the prescribed form to facilitate

issue of certificate of registration under the VAT Act.

(b) Dealers not falling under category (a) and incurring liability to pay tax under the VAT

Act will have to apply in the prescribed form within 30 days from the date of incurring

liability. The application will be disposed of within 21 days of filing of the application.

Such dealers, if apply for registration within 30 days from the date of incurring

liability, will be entitled to issue tax invoice from the very first day of incurring liability.

(c) A dealer who is not liable to pay tax under the VAT Act is also eligible for getting

himself registered voluntarily provided he sets up a business of selling or purchasing

goods in West Bengal.

All dealers registered under the VAT Act will have to use 11 digit TIN or Taxpayer’s

Identification Number. Dealers registered under the West Bengal Sales Tax Act, 1994 and

Central Sales Tax Act, 1956, have already been allotted the TIN and intimated accordingly.

Identification of TIN meant for VAT is very simple. The third digit from right of 11 digit TIN

indicates–

(a) the West Bengal Sales Tax Act, 1994, if it is 1, for example 19578989

(b) the Central Sales Tax Act, 1956, if it is 2, for example 19578989

(c) the West Bengal Value Added Tax Act, 2003, if it is 0, for example 19578989

A dealer is required to maintain true and up to date account of the quantity and value of

goods purchased, manufactured or sold by him or used in execution of works contract or

held by him in stock. Books of accounts that a dealer normally maintains will continue to be

maintained under the VAT Act along with input tax account, output tax account and input tax

credit account in the ledger and certain statutory document like tax invoice. Such books of

accounts and documents are to be preserved by a dealer for atleast eight years, as under

the West Bengal Sales Tax Act, 1994.

In case of dealers opting for compounded rate of tax, only output tax account need be

maintained and gross sale value or gross amount of contractual transfer price will suffice to

calculate liability under the VAT Act.

Multiplicity of sales tax rates existing under the West Bengal Sales Tax Act, 1994 have

been done away with. There are only two basic VAT rates of 4% and 12.5%. Basic

necessities such as medicines and drugs, all agricultural and industrial inputs, capital goods

and declared goods have been placed under 4% category. Majority of remaining taxable

commodities will fall under the general VAT rate of 12.5%. Besides this a few goods namely,

gold, silver, platinum and ornaments thereof and tea sold through auction at tea auction

centres in West Bengal duly authorised by the Indian Tea Board, will attract a lower rate of

tax of 1% only. There is also a list of goods exempted from payment of tax. Details of goods

and VAT rate applicable to the sales thereof can be seen from Schedules appended to the

VAT Act. Works contractors are liable to pay tax @ 4% on that part of their taxable

contractual transfer price which represents transfer of declared goods and the remaining

contractual transfer price will attract tax @ 12.5%.

A dealer registered under the VAT Act is also liable to pay tax on his purchases effected

from unregistered dealers within West Bengal at the rate equivalent to the rate of VAT.

Besides this, an occupier of jute mill and shipper of jute are liable to pay tax @ 2% on

purchases of raw jute effected from within the State.

Purchase tax payable against purchases made from unregistered dealers by a registered

dealer, as well as purchase tax payable by the occupier of jute mill, is eligible for input tax

credit. However, a shipper of jute is not entitled to enjoy input tax credit.

Note

to pay tax under the VAT Act has applied for registration within 30 days of incurring liability

to pay tax, and whose application has not yet been disposed of. Provided that the selling

dealer indicates in tax invoice that he has applied for registration.

No tax is chargeable on either exempt sales or zero-rated sales. Sales of tax-free goods,

that is the sale of goods enumerated under Schedule A of the VAT Act, do not entitle a

dealer for input tax credit (unless he is an exporter). Sales effected in the course of export or

to dealers in Special Economic Zones are termed as zero-rated sales and dealers effecting

such sales are entitled to claim input tax credit.

All exports made out of the country by 100% Export Oriented Units (EOUs), situated

outside Special Economic Zones (SEZs), will be eligible for refund in full for tax paid within

the State, and this refund will be made within three months. Units located in SEZs will be

able to purchase goods without payment of VAT, whereas EOUs will be granted refund of

VAT paid by them at the time of making purchase from another dealer in West Bengal, if

any. A dealer will be entitled to receive payment of interest for refunds delayed beyond three

months.

A reseller, registered under the VAT Act and engaged in buying and selling goods within

West Bengal, and having an annual turnover of sales not exceeding fifty lakh rupees in the

preceding year will have an option to pay tax at the compounded rate of 0.25 %, on the

entire turnover of sales. Dealers having gross sales not exceeding fifty lakh rupees in the

year 2004-2005, under the West Bengal Sales Tax Act, 1994, can also opt for this scheme.

However, dealers effecting inter-State sales or inter-State purchases are not eligible for this

scheme.

Similarly, works contractors registered under the VAT Act will have an option to pay tax

at a compounded rate of 2% on the entire contractual transfer price, irrespective of quantum

of contractual transfer price.

Once a dealer has exercised option for payment of tax at the compounded rate, it will be

valid for one financial year.

It may be mentioned here that the dealers opting for payment of tax at compounded rate

are not entitled to input tax credit and can not issue tax invoices.

An option to pay tax on maximum retail price (MRP) will be available to manufacturers

and importers of certain goods, to be notified/specified by the State Government in this

behalf. Some of the features of the scheme are given below:

(a) The option to pay tax on MRP will be available only to importers and manufacturers

of goods notified/specified by the State Government.

(b) The option is applicable only for sales effected in West Bengal.

(c) A dealer opting for the scheme will have to pay tax on the sale of notified/specified

goods by applying full VAT rate on MRP and not on his actual sale price.

(d) The selling dealer will clearly indicate “INVOICE FOR TAX ON MRP” on the body of

tax invoice issued by him.

(e) The dealer purchasing goods against ‘Invoice for tax on MRP' will not get input tax

credit against such invoice but he will be entitled to claim re-imbursement of the

exact amount, paid or payable by him at the time of purchase of such goods, from

the buyer, provided that the MRP excludes tax. In case where MRP includes tax, no

tax can be realised separately from buyers.

(f) Sale of goods purchased against ‘MRP Invoice’ will not form part of the gross

turnover of sales of the subsequent dealer.

Entire design of VAT with input tax credit is crucially based on documentation of tax

invoice, invoice, cash memo or bill. Tax invoice can be issued only by either a dealer

registered under the VAT Act or by a dealer who has incurred liability to pay tax under the

Act and has applied for registration within 30 days from the date of incurring liability.

A dealer who has opted to pay tax at the compounded rate of 0.25 % on his turnover of

sales or a works contractor who has opted to pay tax at the compounded rate of 2% on his

contractual transfer price is, however, not entitled to issue a tax invoice.

Note

purchase of goods can be set off against sale of any goods, the amount of tax paid at the

time of purchase should not be taken into consideration while adding up profit and fixing the

sale price of goods.

Every registered dealer, except those opting for payment of tax at the compounded rate

of 0.25 % on turnover of sales or at the rate of 2% on contractual transfer price, shall issue

to the purchaser serially numbered tax invoice with the prescribed particulars. This tax

invoice will be signed and dated by the dealer or his authorised regular employee, showing

the required particulars. The dealer shall keep a counterfoil or duplicate of such tax invoice

duly signed and dated. Failure to comply with the above provisions will attract penalty.

It is mandatory for every dealer registered under the VAT Act and for a dealer who is not

registered but whose turnover of sales has exceeded two lakh and fifty thousand rupees in

an accounting year, to issue a serially numbered tax invoice, invoice, bill or cash memo for

each and every transaction of sale exceeding rupees fifty. It is reiterated that “Tax invoice”

can be issued only by either a dealer registered under the VAT Act or by a dealer who has

incurred liability to pay tax under the Act and has applied for registration within 30 days from

the date of incurring liability.

A.

must be incorporated in the tax invoice by the selling dealer:

(a) It shall contain the words, “TAX INVOICE” in bold letters at the top or at any other

prominent place;

(b) date of sale;

(c) date of challan or despatch as the case may be;

(d) name and full postal address of the selling dealer;

(e) telephone number, e-mail address, fax number, if any, of the selling dealer;

(f) registration certificate number of the selling dealer;

(g) name, full postal address, and registration certificate number of the purchasing

dealer;

(h) full descripttion of the goods sold;

(i) quantity or number, as the case may be, of the goods sold;

(j) value of the goods sold;

(k) rate and amount of tax charged in respect of taxable goods;

(l) total amount of the invoice taking into consideration all the amount payable under

different heads; and

(m) signature of the selling dealer or his regular employee, duly authorised by him for

such purpose.

B.

“ORIGINAL – BUYER’S COPY”.

C.

must be readily available for inspection for purposes like audit, cross-verification, etc.,

under the VAT Act.

D.

On demand, a copy of the tax invoice, marked “TRANSPORTER’S COPY” may also be

issued to the buyer.

E.

be filled in by hand in the pre-printed formats so long as they conform to the statutory

provisions.

F.

Dealers having more than one place of business may maintain serial number for each

place of business but the same must bear a different prefix along with the number to

identify that they have been issued from different places of business.

G.

required under any other law like Central Excise in order to use a composite invoice and

avoid duplication.

It is clarified that:

(a) Tax invoices either received or issued by a dealer are not required to be furnished

along with the return for claiming input tax credit.

(b) No purchase price or profit made by the seller is required to be indicated in the tax

invoice.

(c) The tax to be charged in tax invoice is the applicable VAT rate on total sales and not

the difference which a dealer ultimately pays after adjusting input tax credit under the

VAT Act.

VAT paid by a registered dealer while purchasing goods in West Bengal from another

registered dealer or from such unregistered dealer who has incurred liability to pay tax under

the VAT Act and has applied for registration within 30 days of incurring such liability, and

where such purchase is supported by a tax invoice and purchase tax paid by him on

purchases effected from within the State during a tax period (say a month) constitutes the

input tax

The aggregate of tax payable by a dealer under the VAT Act on his sales, purchases and

works contract constitute the

Subject to certain conditions a registered dealer is entitled to set off the input tax against

the output tax of the same tax period and this is called

Input tax credit is available to manufacturers for purchases of raw materials, consumable

stores and packing materials. Similarly, reseller can enjoy input tax credit for purchase of

goods for resale and packing materials used in packing of such goods. Works contractors

too, can enjoy input tax credit for purchase of goods for use in the execution of works

contract.

Input tax credit on capital goods also is available for resellers, manufacturers and works

contractors. However, no input tax credit is available on the old stock of capital goods as on

the day the VAT Act comes into force or on the day dealer gets himself registered under the

VAT Act. Tax credit on capital goods may be adjusted over a maximum of four equal half

yearly instalments. However, capital goods worth rupees one crore purchased in West

Bengal during a month will be allowed input tax credit during the same month.

Input tax credit is also available for the goods lying in stock on the day immediately

before the day the VAT Act comes into force. However, it is reiterated that no input tax credit

is available on stock of capital goods. Input tax credit is also available on purchase of goods

and subsequent stock transfer/consignment sale of goods out of the State subject to the

condition that such credit will be available only on input tax paid in excess of 4%.

A dealer, however, shall not be entitled to input tax credit unless he is in possession of

tax invoice in original. In case of loss of original tax invoice credit can only be allowed if the

dealer applies to the Commissioner in the prescribed manner and the Commissioner allows

his prayer after causing such enquiry as he thinks fit.

Input tax credit is not available when goods purchased are not directly used in business.

Note

example, input tax of goods A, B and C gets set off against the sale of goods X and Y

effected during the same tax period, while claiming input tax credit at the end of the tax

period.

A dealer will be allowed input tax credit on one year old closing stock which is brought

forward as opening stock on the day the VAT Act comes into force. Thus goods purchased

between 1

2005, will be allowed input tax credit as under:

(a) Goods purchased from within West Bengal on payment of tax where tax is shown to

have been charged separately, will be allowed input tax credit in full, that is

equivalent to the amount of tax paid to another dealer while purchasing such goods

in the State.

(b) Closing stock of goods on which no tax is shown to have been charged separately

at the time of purchase, commonly referred to as tax paid goods, will be allowed

input tax credit by applying full rate of tax upon 80 % of valuation of such closing

stock, if rate of tax on sales thereof under the West Bengal Sales Tax Act, 1994

(excluding surcharge, additional surcharge and turnover tax) does not exceed 10%

and upon 70% of valuation of such closing stock of goods, if rate of tax, as stated

here, exceeds 10%. It is clarified that the input tax credit will be available on goods

held in stock, irrespective of whether or not such goods were originally

manufactured in a unit enjoying any of the tax incentives under the West Bengal

Sales Tax Act, 1994.

(c) Input tax credit on finished and semi-finished goods held in stock by a manufacturer

will be available provided the raw materials used therein were purchased in West

Bengal. Method of valuation and basis of raw material component in finished and

semi-finished goods should be reasonable and consistent and in conformity with the

acceptable principles of accounting.

(d) Input tax credit will not exceed the concessional rate of tax, if such goods or raw

materials or finished and semi-finished goods thereof held in stock, were purchased

by the dealer claiming input tax credit, at a concessional rate of tax under the West

Bengal Sales Tax Act, 1994.

(e) There is no bar on sale of goods from old stock till the time it is verified by the

appropriate authority under the VAT Act. Goods out of this stock can be sold or

used in manufacture, etc., as usual but proper documentation showing descripttion,

quantity and value of goods so sold or used in manufacture must be maintained.

No input tax credit will, however, be available on closing stock of goods which–

(i) is purchased from outside West Bengal;

(ii) is enumerated under Schedule I (tax-free goods) of the West Bengal Sales Tax Act,

1994;

(iii) falls under the category of capital goods; and

(iv) does not fall under the ambit of the VAT Act, like lottery tickets, petrol, diesel,

foreign liquor, country liquor, etc.

A registered dealer intending to enjoy input tax credit or input tax rebate on stock of goods

lying on the day the VAT Act comes into force, shall, within thirty days from such day, submit

to the appropriate assessing authority, a statement giving-

A. list of goods lying in stock, where purchase invoice or bill shows the tax separately,

other than semi-finished goods and finished goods of a manufacturer;

B. list of goods lying in stock, where purchase invoice or bill does not show the tax

separately, other than semi-finished goods and finished goods of a manufacturer;

and

C. a break-up of semi-finished goods and finished goods lying in the stock of a

manufacturer and the value of raw materials and consumable stores used for

manufacturing such semi-finished or finished goods,

as the case may be, in the following format:

Name of the dealer :

Address :

Registration Certificate No.:

[Under the West Bengal Value Added Tax Act, 2003].

A.

separately, other than semi-finished goods and finished goods of a manufacturer.

Rate of tax

under the

West

Bengal

Sales Tax

Act, 1994

on the

items

specified in

column (3)

Serial

No.

Item

Name

and

Address

of the

selling

dealer.

Registration

Certificate

No. (if any)

of the selling

dealer.

Invoice/Bill

No. with

date of the

selling

dealer

Quantity/

Number

Lying in

stock

Purchase

Value

(excluding

tax, sch.

and addl.

Sch., if any)

of the qty./

no. lying in

stock

(Rs)

Aggregate

purchase

price for

individual

tax rates

[sub total]

Input tax

credit/ input

tax rebate

claimed

(Tax+Sch.+

Addl Sch +

eligible

TOT,

if any)

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

@ 1% i)

ii)

iii)

@ 2% i)

ii)

iii)

@ 3% i)

ii)

iii)

@ 4% i)

ii)

iii)

@ 4.55% i)

ii)

iii)

@ 4.80% i)

ii)

iii)

@ 5% i)

ii)

iii)

@ 7% i)

ii)

iii)

@ 8% i)

ii)

iii)

@ 10% i)

ii)

iii)

@ 12% i)

ii)

iii)

@ 12.5% i)

ii)

iii)

@ 15% i)

ii)

iii)

@ 17% i)

ii)

iii)

@ 20% i)

ii)

iii)

@ i)

ii)

iii)

@ i)

ii)

iii)

@ i)

ii)

iii)

TOTAL

B.

separately, other than semi-finished goods and finished goods of a manufacturer.

Rate of tax

under the

West Bengal

Sales Tax

Act, 1994 on

the items

specified in

column (3)

Serial

No.

Item

Name and

Address of

the selling

dealer.

Registration

Certificate No.

(if any) of the

selling dealer.

Invoice/Bill No.

with date of

the selling

dealer

Quantity/

Number

Lying in

stock

Purchase

Value

of the

quantity

/number

lying in

stock

(Rs)

Aggregate

purchase

price for

individual tax

rates

[sub total]

70% /

80% of the

amount

specified

in column

(9).

Input tax

credit/

input tax

rebate

claimed

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)

@ 1% i)

ii)

iii)

@ 2% i)

ii)

iii)

@ 3% i)

ii)

iii)

@ 4% i)

ii)

iii)

@

4.55%

i)

ii)

iii)

@

4.80%

i)

ii)

iii)

@ 5% i)

ii)

iii)

@ 7% i)

ii)

iii)

@ 8% i)

ii)

iii)

@ 10% i)

ii)

iii)

@ 12% i)

ii)

iii)

@ 12.5% i)

ii)

iii)

@ 15% i)

ii)

iii)

@ 17% i)

ii)

iii)

@ 20% i)

ii)

iii)

@ i)

ii)

iii)

@ i)

ii)

iii)

@ i)

ii)

iii)

TOTAL

C.

Raw materials consumed. Consumable Stores

consumed.

Purchase from W.B. Purchase

from

outside

W.B.

Purchase from W.B. Purchase

from

outside

W.B.

Tax

charged

Tax not

charged

Tax

charged

Tax not

charged

Others, if

any

Direct

Labour

Overhead

Total

Semi-finished

goods

Finished goods

Total

Certified that the details given above are true to the best of my knowledge.

Signature: -----------------------------------

Name: -----------------------------------

Status -----------------------------------

Requirements for availing input tax credit on old stock.

To avail benefit of input tax credit on closing stock of goods, as aforesaid, a dealer will

have to furnish detailed closing stock inventory to his assessing authority within 30 days

from the day the VAT Act comes into force. The inventory may be verified by the assessing

authority within two months of such submission and input tax credit will be available on the

expiry of the said period.

If the valuation of closing stock, qualifying for input tax credit, exceeds ten lakh rupees in

case of a manufacturer or works contractor and twenty lakh rupees in case of a reseller and

others, the same must be certified by a Chartered Accountant. It is needless to say that

Chartered Accountants will have to be careful in certification and they must understand tax

rates under the West Bengal Sales Tax Act, 1994 and exercise caution while working out the

component of raw materials purchased in West Bengal in the finished and semi-finished

goods of a dealer.

If the input tax credit exceeds the tax payable on sales in a tax period, the excess credit

will be carried over to the next tax period or next financial year, as the case may be. If there

is any excess unadjusted input tax credit at the end of second year, then the same will be

eligible for refund in normal course.

There are separate provisions regarding adjustments of input tax credit for dealers

enjoying incentives under the West Bengal Sales Tax Act, 1994 and who continue to enjoy

incentives for unexpired amount or unexpired period under the VAT Act.

Reverse credit.

In case where a registered dealer avails of input tax credit for purchase of goods and

subsequently disposes of such goods not in accordance with the provisions of the VAT Act,

then the input tax credit so availed of shall be deducted from the input tax credit of the tax

period during which such occasion arises.

Following are some of the instances where reversal of input tax credit will take place in

the tax period when such occasion arises:

(a) goods purchased and subsequently returned to the seller for any reason whatsoever;

(b) goods purchased for business but used for personal consumption, gift or given out as

free samples;

(c) goods stolen or destroyed;

(d) goods remaining in stock at the time of closure of business.

Note

otherwise than by way of sale (like branch transfer or transfer to an agent), will lead to a

reversal of input tax credit to the extent of 4%.

For example, a dealer purchases television sets on payment of VAT at the rate of 12.5%

in West Bengal in May, 2005 and avails of full input tax credit but subsequently transfers the

same to his branch office outside the State in July, 2005. He will have to reverse 4% of input

tax credit in July, 2005. In other words the dealer is entitled to avail of only 8.5% of input tax

as input tax credit and 4% is ineligible.

Computation of tax liability.

Calculating tax liability under the VAT Act is very simple. The total amount of input tax,

that is tax paid on purchases effected during a tax period, duly supported by tax invoices, is

to be deducted from the output tax, that is tax chargeable on all taxable sales and purchase

tax payable under the VAT Act during the same tax period, subject to eligibility under the

provisions of input tax credit. The difference of output tax over input tax is payable by a

dealer as net tax under the Act. In case input tax credit exceeds the amount of output tax,

the same will be carried forward to the next tax period.

Net tax = Output tax – Input tax

Dealers enjoying tax incentives, namely Tax holiday, Remission of tax and Deferment of

payment of tax under the West Bengal Sales Tax Act, 1994, will continue to enjoy such

incentives in a restricted manner after making these compatible with the VAT Act.

To maintain the continuity of VAT, dealers enjoying tax incentives will have to buy goods

paying tax and will have to sell goods charging VAT and issue tax invoice accordingly. The

output tax chargeable will qualify to be remitted or deferred in the prescribed manner. The

input tax credit for a dealer enjoying tax incentive will, however, be deferred and the

accumulated input tax credit will be available for adjustment against output tax of the dealer

after the expiry of such incentive. In other words such dealers can carry forward input tax

credit accumulated during the incentive period and adjust the same against output tax after

the expiry of the incentive period.

In so far as zero rated sales are concerned, namely sales in the course of export out of

the territory of India and sales to units in Special Economic Zone, such dealers will be

eligible to claim input tax credit proportionately and claim refund.

The Central Sales Tax Act, 1956, will continue for the time being and all inter-State sales

will continue to be taxed as usual, though the Act may be phased out within next few years.

The use of declaration in form ‘C’ or certificate in form ‘D’ will also continue for inter-State

sales.

Input tax credit or rebate will be available against inter-State sales effected from West

Bengal for VAT paid in West Bengal while purchasing goods, but no input tax credit will be

available on inter-State purchases of goods which are sold or used in manufacture in West

Bengal.

It may be mentioned here that input tax credit will be available in full for inter-State sales

irrespective of whether the rate of tax under the Central Sales Tax Act, 1956 is more or less

than the VAT rate in West Bengal.

The input tax credit for goods purchased from within West Bengal and sold to other

States will be first adjusted in the return under the West Bengal Value Added Tax Act, 2003,

and if there is any excess of input tax credit then the same will be adjusted with the tax

liability under the Central Sales Tax Act, 1956.

Capital goods means plant and machinery meant for use in manufacture, or in works

contract, and such other goods required by a reseller, to keep the goods in saleable

condition or, to effect the sale properly, as may be notified by the State Government from

time to time in the Official Gazette, when such purchases are capitalised in the books of

account of such manufacturer, works contractor, or reseller, as the case may be.

Note

2. The expenditure incurred has to be of the nature of capital expenditure.

3. Such expenditure should appear in the dealer’s books of accounts under the heading

‘Plant and machinery account’ as per general accounting principle.

Under VAT, return will be simple where the number of tax rates have been brought down

to two principal rates, namely, 4% and 12.5%. Since obtaining or issuing of declaration forms

will no longer be required for majority of sales, computation of tax has become very simple.

Payment of tax will continue to be monthly while returns will have to be filed quarterly as

under the West Bengal Sales Tax Act, 1994 and Central Sales Tax Act, 1956. Under the

VAT Act a dealer will get an English calendar month’s time to submit return from the end of

the quarter instead of existing 30 days.

For delay in payment of tax of any period interest will be payable by a dealer at the rate

of 1% per month and the interest will be determined for each day of default.

The VAT liability will be self-assessed by the dealers themselves in terms of submission

of returns by setting off the input tax credit against the output tax. There will no longer be

compulsory assessment at the end of each year as is existing now. If no specific notice is

issued proposing assessment within the time limit specified under the VAT Act, the dealer

will be deemed to have been assessed on the basis of returns submitted by him.

Correctness of self-assessment will be checked through a system of Departmental Audit.

A certain percentage of dealers will be selected for audit within the month of January of the

following year by applying a scientific method of selection. If no anomaly is detected upon

audit, the matter will be closed. If, however, evasion is detected on audit, the concerned

dealer may be taken up for assessment for previous periods also. The Audit Wing will

remain de-linked from tax collection wing to remove any bias. The audit team will conduct its

work in a time bound manner and the process of audit will be completed within six months. A

copy of audit report will also be sent to the dealer.

Provisional Certificates (PC) issued to persons who intend to set up a manufacturing unit

under the West Bengal Sales Tax Act, 1994, will no longer be valid with effect from the day

the VAT Act comes into force. There will be no provision for issue of PC under the VAT Act.

The provision of way bill for transportation of goods to and from West Bengal will continue as

it exists under the West Bengal Sales Tax Act, 1994 and the way bills already issued to

dealers will remain valid as usual.

An overall fall in prices is expected after VAT comes into force due to removal of

cascading effect of tax on tax. Prices are also expected to fall as tax component will come

down from the present level in case of a number of consumer goods and necessities like

drugs and medicines. The list given below shows the favourable impact of VAT on some of

such goods:

S

RATE UNDER

S

T

VAT

1. Aerated water 19.55

2. Cement 20.25

3. Cooked food 17.25

4. Cosmetics 26.00

5. Drugs and medicines 8.00

6. Fertiliser 4.6

7. Fluorescent tubes 17.25

8. Furnace oil 23.00

9. Gold jewellery 1.15

10. Health drinks 19.55

11. L.P.G. 17.00

12. Lubricants 17.25

13. Motor vehicles 13.8

14. Paints 13.8

15. Paper 9.2

16. Refrigerators 17.25

17. Soaps 17.25

18. Tea 8

19. Television sets 20.70

20. Tooth brush, Deodorants 19.55

21. Washing detergents 17.25

Sl. No. Date Transaction Amount

Rupees

Tax Rate % Tax amount

Rupees

Total Value

Rupees

1 01.4.2005 Purchase of leather shoes 10000.00 12.50% 1250.00 11250.00

2 02.4.2005 Purchase of ladies' leather bags 6000.00 12.50% 750.00 6750.00

3 03.4.2005 Purchase of size measuring stool 800.00 12.50% 100.00 900.00

4 04.4.2005 Sale of leather shoes 2000.00 12.50% 250.00 2250.00

5 05.4.2005 Sale of leather shoes 1000.00 12.50% 125.00 1125.00

6 06.4.2005 Purchase of leather suitcases 8000.00 12.50% 1000.00 9000.00

7 07.4.2005 Sale of ladies' bags 3000.00 12.50% 375.00 3375.00

8 08.4.2005 Purchase of gents' purse 1000.00 12.50% 125.00 1125.00

9 09.4.2005 Purchase of office stationery 600.00 4.00% 24.00 624.00

10 10.4.2005 Sale of leather suitcases 2000.00 12.50% 250.00 2250.00

11 11.4.2005 Purchase of Cash Register Machine 2200.00 12.50% 275.00 2475.00

12 12.4.2005 Sale of gents' purse 400.00 12.50% 50.00 450.00

13 13.4.2005 Purchase of leather shoes 8000.00 12.50% 1000.00 9000.00

14 14.4.2005 Purchase of gents' leather belts 2000.00 12.50% 250.00 2250.00

15 15.4.2005 Sale of leather shoes 1800.00 12.50% 225.00 2025.00

16 16.4.2005 Purchase of leather belt 200.00 12.50% 25.00 225.00

17 17.4.2005 Purchase of leather pouch 1000.00 12.50% 125.00 1125.00

18 18.4.2005 Sale of gents' leather belts 400.00 12.50% 50.00 450.00

19 19.4.2005 Sale of leather shoes 2000.00 12.50% 250.00 2250.00

20 20.4.2005 Sale of leather pouch 400.00 12.50% 50.00 450.00

21 21.4.2005 Sale of ladies' leather bags 1000.00 12.50% 125.00 1125.00

22 22.4.2005 Purchase of office stationery 400.00 4.00% 16.00 416.00

23 23.4.2005 Sale of leather shoes 2000.00 12.50% 250.00 2250.00

24 24.4.2005 Sale of gents' leather belts 200.00 12.50% 25.00 225.00

25 25.4.2005 Sale of leather shoes 1000.00 12.50% 125.00 1125.00

26 26.4.2005 Purchase of socks 3000.00 4.00% 120.00 3120.00

27 26.4.2005 Sale of leather shoes 1500.00 12.50% 187.50 1687.50

28 26.4.2005 Sale of leather shoes 2000.00 12.50% 250.00 2250.00

29 26.4.2005 Sale of leather shoes 3000.00 12.50% 375.00 3375.00

30 26.4.2005 Sale of leather shoes 2000.00 12.50% 250.00 2250.00

31 26.4.2005 Sale of socks 1500.00 4.00% 60.00 1560.00

Dr. Cr.

Date Particulars Amount Date Particulars Amount

01.04.2005 To party (supplier) A/c or

Cash / Bank A/c

1250.00 01.04.2005 By input tax credit A/c* 1250.00

02.04.2005 -do- 750.00 02.04.2005 -do-* 750.00

03.04.2005 -do- 100.00 03.04.2005 -do-* **100.00

06.04.2005 -do- 1000.00 06.04.2005 -do-* 1000.00

08.04.2005 -do- 125.00 08.04.2005 -do-* 125.00

09.04.2005 -do- 24.00 09.04.2005 By office stationery A/c* 24.00

11.04.2005 -do- 275.00 11.04.2005 By office equipment A/c* 275.00

13.04.2005 -do- 1000.00 13.04.2005 By input tax credit A/c* 1000.00

14.04.2005 -do- 250.00 14.04.2005 -do-* 250.00

16.04.2005 -do- 25.00 16.04.2005 -do-* 25.00

17.04.2005 -do- 125.00 17.04.2005 -do-* 125.00

22.04.2005 -do- 16.00 22.04.2005 By office stationery A/c* 16.00

26.04.2005 -do- 120.00 26.04.2005 By input tax credit A/c* 120.00

30.04.2005 To input tax credit A/c

[reversal of credit]

150.00 30.04.2005 By purchase A/C* 150.00

5210.00 5210.00

* Instead of daily entry a single consolidated entry may be made at the end of the tax period.

** Provided that the item is capitalised in dealer’s books of accounts.

Notes

1. Input tax account will be debited with the tax amount only to the extent which has

been paid by a registered dealer, other than those who opt to pay tax at the

compounded rate.

2. The portion of the input tax, on which input tax credit is available shall be transferred

to the input tax credit A/c and the portion on which no input tax credit is available is to

be transferred to other accounts like Purchase A/c or Office equipment A/c or Office

stationery A/c, etc., as the case may be.

Dr. Cr.

Date Particulars Amount Date Particulars Amount

01.04.2005 To Input tax A/c 1250.00 30.04.2005 By input tax credit A/c

[reversal of credit]

150.00

02.04.2005 -do- 750.00 30.04.2005 By out put tax A/c 3147.50

03.04.2005 -do- 100.00 30.04.2005 By balance carried

forward

1447.50

06.04.2005 -do- 1000.00

08.04.2005 -do- 125.00

13.04.2005 -do- 1000.00

14.04.2005 -do- 250.00

16.04.2005 -do- 25.00

17.04.2005 -do- 125.00

26.04.2005 -do- 120.00

4745.00 4745.00

01.05.2005 To balance B/F

Dr

Date Particulars Amount Date Particulars Amount

29.04.2005 To party (customer) A/c

or Cash / Bank A/c

(goods returned)

125.00 04.04.2005 By party (customer) A/c or

Cash / Bank A/c

250.00

30.04.2005 To input tax credit A/c 3147.50 05.04.2005 -do- 125.00

07.04.2005 -do- 375.00

10.04.2005 -do- 250.00

12.04.2005 -do- 50.00

15.04.2005 -do- 225.00

18.04.2005 -do- 50.00

19.04.2005 -do- 250.00

20.04.2005 -do- 50.00

21.04.2005 -do- 125.00

23.04.2005 -do- 250.00

24.04.2005 -do- 25.00

25.04.2005 -do- 125.00

26.04.2005 -do-

(187.50+250+375

+250+60)

1122.50

3272.50 3272.50

Note

his output tax, net tax payable for the month will be Nil and the input tax credit of

Rs.1,447.50, being in excess, will be carried forward to the next month, that is May, 2005.

TAX INVOICE* ORIGINAL – BUYER’S COPY

M/S. A B C & CO.

Phone No. :

E-mail : Challan No. and Date:

VAT Registration No.

CST Registration No. Buyer’s VAT No., if any

Sl. No. Quantity Descripttion of goods Price

Per Unit

Value

(Rs)

VAT

Rate

Tax

Amount

Total (Rs.)

1. 1 pair Leather shoes 450.00 450.00 12.5% 56.25 506.25

2. 1 piece Leather bag 250.00 250.00 12.5% 31.25 281.25

3. 2 pairs Socks 75.00 150.00 4% 6.00 156.00

Total

Rupees Nine hundred forty three and fifty paise only.

E & O.E.

Signature

(of selling dealer or his authorised employee)

* In case of manufacturing dealer, “TAX INVOICE–CUM–EXCISE INVOICE” may be

mentioned, if required.

Note

1.

prescribed under the VAT Act and rules framed thereunder (for details see page 4 and

page 5). The tax invoice shown above is only illustrative to indicate the required

particulars. The dealer may have his own format with additional particulars such as those

required for Central Excise. Dealer can have a combined tax invoice for VAT and Central

Excise purposes. Important requirement for original tax invoice is that it should be

retained by the buyer so that it could be produced for inspection before the officials, if

required, in the course of audit or verifications.

2.

required to be to be submitted to the Directorate of Commercial Taxes at the time of filing

of return or claiming input tax credit.

3.

of input tax credit for purchases made during the month. Thus, purchases may be say, of

300 pieces and sales of only 200 pieces. In such a case, tax credit will be available on

tax paid or payable on purchase of 300 pieces while tax payable will be only on 200

pieces. It is reiterated that there is no relation between purchases and sales in so far as

individual invoices are concerned. Tax credit is available at the time of purchase itself,

without waiting for sale of goods so purchased and goods may continue to be in stock,

even though input tax credit has already been availed of.

4.

INVOICE

ORIGINAL – BUYER’S COPY

INVOICE INCLUSIVE OF VAT

M/S. X Y Z & CO.

Phone No. :

E-mail : Challan No. and Date:

VAT Registration No.

CST Registration No. Buyer’s VAT No., if any

Sl. No. Quantity Descripttion of

goods

Total (Rs.)

1. 1 pair Leather shoes 506.25

2. 1 piece Leather bag 281.25

3. 2 pairs Socks 156.00

Total 943.50

Rupees Nine hundred forty three and fifty paise only.

E & O.E.

Signature

(of selling dealer or his authorised employee)

Note

benefit of input tax credit.

Computation of output tax on invoices inclusive of VAT can be worked out by applying the

following formula:

Rate of tax X Value including tax

Rate of Tax + 100

VAT payable on the above invoice is calculated as under:

Computation Output tax

(Rs.)

Leather shoes taxable @ 12.5%

sold for Rs.506.25 including VAT

(12.5 X 506.25) / (12.5 +100) 56.25

Leather bag taxable @ 12.5% sold

for Rs.281.25 including VAT

(12.5 X 281.25) / (12.5 +100) 31.25

Socks taxable @ 4% sold for

Rs.156.00 including VAT

(4 X 156.00) / (4 +100) 6.00

Total 93.50

-------------------------