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Guide to Value-Added-Tax (VAT) Returns in India

VAT or Value Added Tax is the tax imposed by State Government on the sale of goods and services when the yearly turnover crosses Rupees 5 lacs or Rupees 10 lacs (differs from one state to another). All the business entities in conjunction with manufacturers and traders should have VAT registration.

The Term VAT Returns in India

VAT Returns is the amount of Value-Added Tax owed to HM Revenue and Customs, usually submitted on monthly or quarterly basis depending upon the state under which the business is registered. Because the VAT Returns are decided by the state, the taxes and rules are different in respect to every state in India. If the business is located in more than one state, VAT Returns for different states should be filed separately. As VAT is taxed at each production stage, the owner retains some part of VAT collected from the customer while the other part of the amount is transferred to Government’s fund through designated banks every month.

Calculating the VAT that is owed to HMRC or the amount HMRC needs to Pay

When calculating VAT and VAT Returns the following things are taken into consideration;

  • Total sale and purchase of product, material or services across the three-month accounting period.
  • The amount owed for the sales.
  • The total amount reclaimed from a purchase made by the business.

If the amount owed is more than the amount reclaimed, then VAT is to be paid to HMRC (HM Revenue and Customs). But if the amount reclaimed exceeds the amount owed, then HMRC will cover the cost difference.

Filing for VAT Returns in India

After the registration of VAT is confirmed, one can file VAT Returns and pay the taxes online on the Commercial Taxes website of the respective state.

Requirements For e-Filing VAT Returns

There are certain pre-requisite conditions that should be fulfilled before filing VAT Returns online. These are:

  • TIN Number: Before starting the process of e-filing VAT Returns one must acquire a Tax Identification Number (TIN). TIN is an 11-digit number that is issued by the tax department of the concerned state where the business establishment is located. All tax related subjects will be tracked by the State Government by using the Tax Identification Number.
  • User ID: After registration of VAT, the applicant will receive a User ID and password generated by the tax department. One must use this ID to start the procedure of VAT Returns filing. In case of individual filing VAT Returns for the first time, he/she must change the password immediately after logging into one’s account.
  • e-Filing Software: One can only file for VAT Return only if he/she have access to the e-filing software. The applicant must find the option to download this software after logging into his/her account. This software converts the data from the e-filing to XML which can later be uploaded on the online portal of Directorate of Commercial Taxes.
  • VAT Receipts: VAT receipts can be generated in respect to every transaction done via one’s account.

If these things are available and produced forward then the VAT filing takes less time to fulfill. It is important to maintain VAT account as a part of one’s record as it contains the details and statements of all tax progress including Output, Input tax, and VAT payments.

Steps for e-Filing VAT Returns:

  • Step 1: Go to the online portal of the Directorate of Commercial Taxes of your respective state and log into your account. Since VAT comes under the jurisdiction of State Government, there will be different online portals for each state.
  • Step 2: After you log-in download the zipped 14D Form. When you unzip the file, you will get a PDF version of the form that needs to be filled along with the annexure.
  • Step 3: The information required to fill the form is present in the VAT receipts and can be obtained from there. Filling these forms can take a few hours to a day depending on the number of transactions.
  • Step 4: With the help of the software downloaded from the website of the Directorate of Commercial Taxes, convert the form into XML. Then upload this XML file with annexure to the website.
  • Step 5: The e-filing system is an intelligent system that checks for mistakes on the uploaded file. These mistakes should be rectified and the form should be resubmitted on the website.
  • Step 6: After the form is submitted, an acknowledgment receipt or VAT receipt is generated with respect to the VAT filed. This receipt acts as evidence that you filed VAT Returns for the month.

The Advantages of Filing VAT Returns Online

Filing VAT Returns online is a much easier process than filing it manually and its benefits only increase with the growth of one’s business.

The advantages of filing VAT online are listed as follows:

  1. e-filing is less tedious and less time-consuming. In a matter of clicks, the taxpayer will receive the form which can be then filled and uploaded. The whole process takes only a few hours rather than a whole day when done manually.
  2. All the details required are available on the taxpayer’s account. It also auto-checks documents and highlights any infrequencies or mistakes in the submitted form.
  3. If there is any information lacking, the State Government can contact the registered individual directly through his/her account. After being made aware of the requirements one can fill them and process payment on time.
  4. The manual receipts can be misplaced but with the e-filing process the receipts are electronically generated and are always available in one’s account to be easily accessed anytime.

Common Issues that arise while Filing VAT Returns Online

Apart from the immense advantages of filing VAT Returns online, there are some minute glitches that taxpayers go through. In certain states like Meghalaya and Orissa, the websites have problem opening due to lack of infrastructure and non-availability of fast internet service.

E-filing has made the whole procedure of submitting VAT Returns very easy, but due to the stringent timelines and penalty imposed it has caused dissatisfaction amongst businessmen.

In the News

  • Now, file your tax returns with All India ITR mobile app

    Gadgets Now: Technology firms are gearing up to meet tax compliance deadlines with great fervour. All India ITR, an online tax compliance firm launched its e-filing app that works on both Android and iOS.

    14th June 2017

    Gadgets Now

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