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VAT registration in 2 states

Sivaguru SM (Tax Consultant) (235 Points)

18 December 2010

Hi friends!

My client is in A.P. and he wants to sale rice in Karnataka. Now question is whether he register VAT in A.P or Karnataka. If A.P why? If Karnataka why? and also he wants to export Pickles from A.P. to Karnataka. Please advice

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U S Sharma (glidor@gmail.com) (21063 Points)
Replied 18 December 2010

Originally posted by : Rajesh Rathod
	Hi friends! My client is in A.P. and he wants to sale rice in Karnataka. Now question is whether he register VAT in A.P or Karnataka. If A.P why? If Karnataka why? and also he wants to export Pickles from A.P. to Karnataka. Please advice

1.My client is in A.P. and he wants to sale rice in Karnataka. - he can do so by obtaining Central Sales Tax registration in AP

2. he wants to export Pickles from A.P. to Karnataka - he can sell products interstate, but EXPORT is meant to take place outside india.

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Sivaguru SM (Tax Consultant) (235 Points)
Replied 18 December 2010

Thank you Mr. Sharma! Export means only interstate sales. If he register KVAT in same name & style at Karnataka for retail sales of pickles can he eligible for stock transfer? whether it attracts any Tax liability for stock transfer. Can you please explain me?

Sivaguru SM (Tax Consultant) (235 Points)
Replied 18 December 2010

Hello friends!

Please help me or provide me URL for clarifications.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 19 December 2010

VAT dealer following sub-rule( 6) of Rule 20:

(Specific inputs to specific outputs)

USL, a VAT dealer is engaged in manufacturing of various products. The dealer is manufacturing two separate products (product x and product y) wherein the dealer always makes taxable sales of product x and the product y is meant for both taxable sales and stock transfers. The dealer maintains separate records indicating specific inputs required for specific outputs. For a tax period, the method and procedure for arriving eligible input tax credit is illustrated below:

PURCHASES ( INPUT) SALES ( OUTPUT)

RATE OF TAX TURNOVER VAT PAID TURNOVER VAT PAYABLE

4% Goods for 2,00,000 8,000 1,50,000 6,000

taxable goods (Product ‘x’)

4% goods common 4,00,000 16,000 3,00,000 12,000

for taxable sales & (Product ’x’

exempt transactions and ‘y’)

12.5% goods specific 32,000 4,000 NIL NIL

to taxable sales

12.5% goods common 40,000 5,000 NIL NIL

for taxable sales and

exempt transactions

Exempt transactions NIL NIL 1,50,000 NIL

(Product ‘y’)

TOTAL TOTAL

INPUT TAX 33,000 OUTPUT TAX 18,000

USL is using specific inputs for specific taxable sales and certain common inputs meant for both taxable sales and exempt transactions. Hence, USL is eligible to claim full input tax credit for VAT paid on specific inputs for each tax period and for the VAT paid on common inputs, the eligible input tax credit should be arrived for each tax period by applying calculation A x B/C where ;

A = Common input tax for the tax period for each tax rate

B = Taxable turnover

C = Total turnover

(Including value of exempt transactions)

Sl. Descripttion 4% rate Descripttion 12.5% rate

1 Common input 16,000 Common input 5,000

tax paid in the tax paid in the tax

tax period period

2 Apply calculation 16,000 x 4,50,000 8.5% portion 3,400

6,00,000 (tax x 8.5/12.5

3 Eligible input tax 12,000 4% portion 1,600

(tax 4.5%/12.5%)

Eligible input tax 1,600 x 4,50,000

in 4% portion out 6,00,000

of 12.5% rate paid. = Rs.1,200

Eligible input tax 3,400 + 1200

credit for 12.5% = 4600

rate related to

common inputs

Eligible input tax credit for

Specific inputs : Rs.8,000 (4%) + Rs.4,000 (12.5%)

: Rs.12,000/-

Total eligible input tax credit for

the tax period : Rs.12,000 + Rs.16,600

: Rs.28,600

VAT payable /Credit carried over : Output tax – Input tax

: Rs.18,000 – Rs.28,600

: (+) 10,600 credit carried over to next period

NOTE: I) USL should submit Form VAT 200 A every month, making adjustment of input tax credit to arrive and claim eligible input tax credit for that tax period for each rate.

2) Further, USL should also carry out adjustment of input tax credit for each tax rate for a period of 12 months ending March and submit such details in Form VAT 200B.

3) Such adjustment shall be made as below:

a) any excess claimed in the monthly VAT returns shall be paid back in the return for March by adding it to the appropriate box in the output column for each tax rate.

b) any balance credit eligible in the monthly returns shall be claimed is the return for March by adding it to the appropriate box in the input column for each tax rate.