VAT Return

VAT Return: Overview

Value Added Tax (VAT) is one of the revolutionary tax reforms introduced in the Indian economic system. It was introduced to remove the complications in the tax structure and to bring in more transparency and effectiveness in to the taxation system. It’s a state-level, multi-stage taxation structure. That means, taxes are collected in installments or at different stages of production and distribution of goods and services. VAT system of taxation is adopted in almost all the states of the country. VAT VAT Return is collected at various points of production and sales with a provision of ‘input tax credit (ITC)’ to the seller which can be claimed against the tax liability on subsequent sale. Ultimately, value added tax is borne by the final consumer of the product  and gets paid by the manufacturer to the government.

Collection of value added tax is destination based. It’s basically levied on the place of final consumption of goods and services and is categorized in the following ways:

  • Intra-state (goods and services consumed within same state)
  • Inter-state (movement of goods between two or more states)
  • Import of goods and services.

VAT Return Filing

Value added tax is a type of tax levied on sale and purchase of goods and services. Though VAT is borne by the final consumer of goods and services, it’s collected and submitted by a seller of product to the state government. That is the reason for it being categorized as an indirect form of tax. That means, value added tax returns are filed by seller of goods and services. Every state in the country has distinct rules for collection of value added tax as it’s a state based tax system.

Pre-specification for filing VAT returns online

  • Manufacturing or selling enterprises having turnover equal to or more than Rs.5 lakhs are required to register themselves for filing value added tax returns. It’s a mandatory requirement for all enterprises involved in the sale of goods and services to get the registration done when the stipulated turnover limit exceeds.
  • As a process of registration, enterprises should apply for TIN (Tax Identification Number) before filing the returns online. Tax identification number is an 11 digit numeric code issued by the particular state tax department for the purpose of tracking tax related transactions.
  • After the enterprise gets registered under particular state’s Value Added Tax Act, they will be provided with login details comprising user ID and password from Directorate of Commercial Taxes for e-filing the VAT returns.
  • Registered enterprises must download the client software from the official website of Directorate of Commercial Taxes. They should ensure uploading data of returns filing in XML format.
  • Registered dealers should have the particular components installed in their computer as specified in the e-filing portal of Directorate of Commercial Taxes.

Benefits of Filing the Value Added Tax Returns

  • An enterprise is entitled to value added tax deduction for procurement of raw materials for the production.
  • It shows the credibility of your business. Being law compliant gives your business the image of a law abiding large entity.
  • Entities are eligible to claim the refund of value added tax
  • Makes your business more transparent and ensures that you follow business ethics.
  • Your contribution towards advancement of nation makes you a responsible citizen
  • Filing the VAT return helps you avoid penalty

Steps for filing Value Added Tax Return

Filing the Value Added Tax return electronically or manually is quite simple, easy and convenient process. Follow below steps to e-file the VAT return

  • Step I – Get your registration done

Apply for Tax Identification Number (TIN) with the particular State’s department of tax. Tax identification number is a unique eleven digit number issued by income tax department.

  • Step II – Login to the official website

VAT is a state level tax. Hence filing has to done as per the tax laws of your respective state. Login to the official website of your state’s Directorate of Commercial Taxes with the help of user ID and password which was sent to you at your registered address after registration.

  • Step III – Download the VAT return file

E-filing portal of each state’s tax department will have the specific blank form for VAT return filing available in PDF format which can be downloaded. There is even an option to fill in the required information in the form online (the form available can be filled and edited online).

  • Step IV Fill in the necessary details

If you have downloaded the blank form, fill in all the requisite details without any error

  • Step V Payment of VAT amount in bank

Make the payment of VAT as applicable to you in the bank and make note of the payment challan number.

  • Step VI Upload the return file in the website

After making the necessary VAT payment, upload the return file on the official website of your respective state’s Directorate of Commercial Taxes

Key Points in filing VAT returns

  • Filing can be done both electronically and manually. You have the liberty to choose your preferred mode of filing.
  • VAT returns are outstanding on the 20th of succeeding month after the current month. That means, for 20th November 2016, the due date of value added tax return is 20th December 2016.
  • Payment can be done by direct debit instruction, net banking facility or e-payment facility provided by your bank.

To sum it up, introduction of value added tax has brought in more simplicity and transparency in to the Indian indirect tax system by eliminating the cascading effect of tax (double taxation). VAT has reduced the tax evasion. VAT is easy to administer and simple in comparison to other indirect taxes. Procedure for filing the VAT returns, making a tax payment and assessment are quite simple. Hence, have compliance with the tax laws for your business, get the computation of value added tax payments and file the tax returns on time.

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