abhishreshthaa
Abhijeet S
Procedure of Self-Assessment of VAT Liability
The basic simplification in VAT is that VAT liability will be self-assessed by the dealers themselves in terms of submission of returns upon setting off the tax credit. Return forms as well as other procedures will be simple in all States. There will no longer be compulsory assessment at the end of each year as exists now.
If no specific notice is issued proposing departmental audit of the books of accounts of the dealer within the time limit specified in the Act, the dealer will be deemed to have been self-assessed on the basis of returns submitted by him. Because of the importance of the concept of self-assessment in VAT, provision for “self-assessment” will be stated in the VAT Bills of the States.
Audit
Correctness of self-assessment will be checked through a system of Departmental Audit. A certain percentage of the dealers will be taken up for audit every year on a scientific basis. If, however, evasion is detected on audit, the concerned dealer may be taken up for audit for previous periods.
This 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 audit will be completed within six months.
The audit report will be transparently sent to the dealer also. Simultaneously, a cross-checking, computerized system is being worked out on the basis of coordination between the tax authorities of the State Governments and the authorities of Central Excise and Income Tax to compare constantly the tax returns and set-off documents of VAT system of the States and those of Central Excise and Income Tax.
This comprehensive cross-checking system will help reduce tax evasion and also lead to significant growth of tax revenue. At the same time, by protecting transparently the interests of tax-complying dealers against the unfair practices of tax-evaders, the system will also bring in more equal competition in the sphere of trade and industry.
Declaration Form
There will be no need for any provision for concessional sale under the VAT Act since the provision for setoff makes the input zero - rated. Hence, there will be no need for declaration form, which will be a further relief for dealers.
Incentives
Under the VAT system, the existing incentive schemes may be continued in the manner deemed appropriate by the States after ensuring that VAT chain is not affected.
Other Taxes
As mentioned earlier, all other existing taxes such as turnover tax, surcharge, additional surcharge and Special Additional Tax (SAT) would be abolished. There will not be any reference to these taxes in the VAT Bills. The States that have already introduced entry tax and intend to continue with this tax should make it vat able. If not made vat able, entry tax will need to be abolished. However, this will not apply to entry tax that may be levied in lieu of octroi.
Penal Provisions
Penal provisions in the VAT Bills should not be more stringent than in the existing Sales Tax Act.
Coverage of Goods under VAT
In general, all the goods, including declared goods will be covered under VAT and will get the benefit of input tax credit. The only few goods which will be outside VAT will be liquor, lottery tickets, petrol, diesel, aviation turbine fuel and other motor spirit since their prices are not fully market determined.
These will continue to be taxed under the Sales Tax Act or any other State Act or even by making special provisions in the VAT Act itself, and with uniform floor rates decided by the Empowered Committee.
The basic simplification in VAT is that VAT liability will be self-assessed by the dealers themselves in terms of submission of returns upon setting off the tax credit. Return forms as well as other procedures will be simple in all States. There will no longer be compulsory assessment at the end of each year as exists now.
If no specific notice is issued proposing departmental audit of the books of accounts of the dealer within the time limit specified in the Act, the dealer will be deemed to have been self-assessed on the basis of returns submitted by him. Because of the importance of the concept of self-assessment in VAT, provision for “self-assessment” will be stated in the VAT Bills of the States.
Audit
Correctness of self-assessment will be checked through a system of Departmental Audit. A certain percentage of the dealers will be taken up for audit every year on a scientific basis. If, however, evasion is detected on audit, the concerned dealer may be taken up for audit for previous periods.
This 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 audit will be completed within six months.
The audit report will be transparently sent to the dealer also. Simultaneously, a cross-checking, computerized system is being worked out on the basis of coordination between the tax authorities of the State Governments and the authorities of Central Excise and Income Tax to compare constantly the tax returns and set-off documents of VAT system of the States and those of Central Excise and Income Tax.
This comprehensive cross-checking system will help reduce tax evasion and also lead to significant growth of tax revenue. At the same time, by protecting transparently the interests of tax-complying dealers against the unfair practices of tax-evaders, the system will also bring in more equal competition in the sphere of trade and industry.
Declaration Form
There will be no need for any provision for concessional sale under the VAT Act since the provision for setoff makes the input zero - rated. Hence, there will be no need for declaration form, which will be a further relief for dealers.
Incentives
Under the VAT system, the existing incentive schemes may be continued in the manner deemed appropriate by the States after ensuring that VAT chain is not affected.
Other Taxes
As mentioned earlier, all other existing taxes such as turnover tax, surcharge, additional surcharge and Special Additional Tax (SAT) would be abolished. There will not be any reference to these taxes in the VAT Bills. The States that have already introduced entry tax and intend to continue with this tax should make it vat able. If not made vat able, entry tax will need to be abolished. However, this will not apply to entry tax that may be levied in lieu of octroi.
Penal Provisions
Penal provisions in the VAT Bills should not be more stringent than in the existing Sales Tax Act.
Coverage of Goods under VAT
In general, all the goods, including declared goods will be covered under VAT and will get the benefit of input tax credit. The only few goods which will be outside VAT will be liquor, lottery tickets, petrol, diesel, aviation turbine fuel and other motor spirit since their prices are not fully market determined.
These will continue to be taxed under the Sales Tax Act or any other State Act or even by making special provisions in the VAT Act itself, and with uniform floor rates decided by the Empowered Committee.