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Sales Tax and VAT


Implementation in BUSY

Overview of Sales Tax


Broadly speaking, there are two types of taxes, direct and indirect, which are levied by the government in the economy. Direct tax is levied on persons (legal or natural) and collected directly by the government. For example, income tax and corporate tax are forms of direct taxation. Indirect tax is tax levied on goods or services rather than persons or organizations. It is levied on the production or sale of a goods or services. The value of indirect taxes is included in the price paid by the consumer (purchaser) for the goods or services. Thus, the tax burden lies on the consumer. Intermediaries (sellers) collect the tax and deposit it with the government. For example, sales tax is a form of indirect taxation. Thus, there are different types of taxes that are levied in an economy depending on the need of the economy.

Taxes applicable to the Indian Economy


In the Indian scenario, various types of taxes are imposed. Let us have a look at the table given here to understand the different types of taxes. Tax Structure

Direct Taxes

Indirect Taxes

Examples are: Income tax for individuals Corporate tax for Companies Wealth tax Gift tax

Imposed by Central Government For example: Central Sales Tax Central Excise Customs

Imposed by State Governments For example: Local Sales Tax Service Tax Other local taxes such as entry tax or octroi VAT

With respect to the current tax structure, we will discuss Local Sales tax and Central Sales Tax.

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The term sales tax refers to the tax that is levied on sales. The main aim of imposing tax on sales is that the government should earn revenue on the sales generated in the economy. Thus, this form of taxation is an important source of revenue for the government. Sales can either be local or central. Local sale is sale within the state. For example, if a dealer in Delhi buys car parts from a manufacturer based in Delhi then it is a local sale. On the other hand, Central sale will be inter-state sale. For example if the dealer in Delhi buys car parts from a manufacturer based in Mumbai then it is a central sale. Let us now look at the definition of Local Sales Tax and Central Sales Tax.

Local Sales tax


Local sales tax is levied on i.e. local sale. It is collected by the sellers and deposited with the government. It is commonly referred to as LST.

Central Sales tax


Central sales tax is levied on sale of goods between two states i.e. inter-state sale. Inter-state sale is commonly referred to as central sale. Central Sales tax is collected by the sellers and deposited with the government. It is commonly referred to as CST. To understand how LST and CST are levied on sales we will use a common case scenario, which is explained here.

Case Scenario for LST


Ahead Cars Inc. is an automobile and car parts manufacturer based in Delhi. To distribute the products (cars and car parts) the company has a chain of distributors and dealers in Delhi. Let us understand with the help of a diagrammatic representation. Ahead Cars Inc (Manufacturer ) Fast Wheels (Distributor based in Delhi) Today Cars (Dealer based in Delhi) Go Cars (Retailer based in Delhi) Consumer (Based in Delhi)

This diagram depicts the chain of transaction that takes place for sale of goods to the consumer. Let us assume that the tax has been levied at each point of sale. This case then becomes a Multi Taxation case.

Multi taxation Case


1. Ahead Cars Inc. manufactures car parts and sells 1 piece @ Rs.121 to Fast Wheels, the distributor in Delhi. 2. Fast Wheels sells the car parts @ Rs.144 to Today Cars, the dealer in Delhi. 3. Today Cars sells the car parts to Go Cars @ Rs.169, the retailer in Delhi. 4. Go Cars sells the car parts @ Rs.196 to a consumer in Delhi. Since the sales involved in this scenario are local sales, LST @10% has been levied on all the sales.

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Let us have a look at the cost price and selling price given here in the form of a table for the business entities in the chain. Elements/ Business Entity Ahead Cars Inc (Manufactu rer) 1 * 100= 100 Fast Wheels (Distribut or based in Delhi) 121 Today Cars (Dealer based in Delhi) 144 Go Cars (Retailer based in Delhi) 169 Consumer (Based in Delhi)

Cost Price (manufacturi ng cost/Procure ment cost) Profit margin Selling Price (Cost Price + Profit margin) LST (10% of Selling Price) Total

196

10 100 + 10 = 110 11

10 121 + 10 = 131 13 (rounded off to nearest rupee) 131 + 13 = 144

10 144 + 10 =154 15 (rounded off to nearest rupee) 154 + 15 =169

10 169 + 10 =179 17 (rounded off to nearest rupee) 179 + 17 = 196

N. A. N. A.

N. A.

110 + 11 =121

N. A.

The consumer paid Rs. 196 inclusive of the LST paid at each point of sale. Let us assume that the consumer had contacted the manufacturer and bought the goods directly from him. In that case, the consumer would pay Rs. 121 only. Thus, the consumer paid a higher price in Multi taxation case. Moreover, in Multi taxation case, tax has been paid at every point of sale i.e. multi point tax whereas the goods have been consumed only once. The purpose of sales tax is to levy tax on consumption of goods. If the goods have been consumed once the sales tax should also be levied once. Thus, there is a need to levy tax methodically and at one point without overburdening the consumer. For this purpose there are two methods to levy tax that are approved and accepted by the Indian government. Let us discuss the methods in detail. The two methods to levy tax on sales are: Tax paid at first point of sale Sale against Sales Tax Declaration Form

Tax paid at first point of sale


In this method tax is paid at the first point of sale. In the case scenario, tax will be paid by Fast Wheels @ 10% to Ahead Cars Inc. Thus, Ahead Cars is responsible for depositing the tax collected with the government. Since the tax burden always falls on the consumer, thus Fast Wheels will increase its cost price to include the tax paid and recover the tax from Today Cars (consumer for Fast Wheels). Similarly Today Cars will recover the tax paid from Go Cars and Go Cars will recover the tax from the consumer.

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Let us have a look at the cost price and selling price given here in the form of a table for the business entities in the chain. Elements/ Business Entity Ahead Cars Inc (Manufactu rer) 1 * 100= 100 Fast Wheels (Distribut or based in Delhi) 121 Today Cars (Dealer based in Delhi) 131 Go Cars (Retailer based in Delhi) 141 Consumer (Based in Delhi)

Cost Price (manufacturin g cost/Procurem ent cost) Profit margin Selling Price LST (10%) Total Tax recovered/paid

151

10 100 + 10 = 110 11 110 + 11 =121 Tax collected from buyer and deposited with the government

10 121 + 10 = 131 Paid at first point 131 Tax paid

10 131 + 10 =141 Paid at first point 141 Tax paid

10 141 + 10 =151 Paid at first point 151 Tax paid

N. A. N. A. N. A. N. A. Tax paid

In this method, tax is collected and deposited with the government at the first point of sale. Further sales will be made on tax paid bills. The first transaction is a tax payable sale while the other three transactions are tax paid sales.

Sale against Sales Tax Declaration Form


In this method, instead of paying the tax on sale the buyer issues a Sales Tax Declaration Form to the seller. These forms are commonly known as ST Forms. The Sales Tax Department issues ST Forms only to dealers who are registered with the Sales Tax Department. There are different ST Forms for CST and LST. For example, in Delhi the LST forms applicable are ST1 and ST35. The CST form most commonly used is Form C. The type of form used depends on the type of sale and the goods. The purpose of these forms is that the issuer of the form will not pay tax and will assume responsibility for collecting tax on further sale of the goods. The reason behind issuing these forms is that the burden of the tax has to fall on the consumer and hence the middle business entities need not pay tax. In the above example, all the business entities involved in the chain pay tax and then recover from the next buyer. If the business entities issue a ST Form then they need not pay tax. The only condition for issuing ST Form is that the business entity should be a registered dealer with the Sales Tax Department. Let us have a look at the cost price and selling price given here in the form of a table for the business entities in the chain.

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Elements/ Business Entity Ahead Cars Inc (Manufact urer) 1 * 100= 100 10 100 + 10 = 110 Receives ST Form from the buyer Fast Wheels (Distribut or based in Delhi) 110 Today Cars (Dealer based in Delhi) 120 Go Cars (Retailer based in Delhi) 130 Consumer (Based in Delhi)

Cost Price (manufacturing cost/Procurement cost) Profit margin Selling Price LST (10%)

154

10 110 + 10 = 120 Receives ST Form from the buyer

Total Tax recovered/paid

110 Sold goods against ST Form

120 Sold goods against ST Form

10 120 + 10 =130 Receive s ST Form from the buyer 130 Sold goods against ST Form

10 130 + 10 =140 Charges LST amountin g to Rs. 14 140 + 14 = 154 Tax collected from the buyer and deposited with the governme nt

N. A. N. A. N. A.

N. A. Tax paid

The first three transactions are cases of sales against ST Form. The fourth transaction is a case of tax payable sale.

Comparison between the two methods


Under both the methods the tax deposited with the government and the prices paid by the consumer are different. Let us understand with the help of the table given here. Elements/Method Tax deposited with the government Price paid by the consumer Comparison Tax Paid at First point of sale 11 151 Government gets less tax Consumer pays a lower price Sales against Tax Declaration form 14 154 Government gets more tax Consumer pays a higher price

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The method followed for levying tax depends on the type of goods sold. The government has listed the goods for both the methods separately, thus clarifying the method to be used for different types of goods.
Important points to be remembered when following any of the two methods: The burden of the tax always falls on the consumer. Tax has to be paid at some point in the chain of sale. Tax should be paid at one point only to avoid multi taxation.

Till now we have discussed a case involving local sales. Let us discuss the inter-state sales where CST is applicable with the help of the case scenario explained here. For inter-state sales the two methods remain the same but the tax rates and the ST forms are different.

Case Scenario for CST


Fast Wheels, a distributor for Ahead Cars Inc., handles the market for both Delhi and Gujarat. It has a chain of dealers and retailers in Gujarat. Let us understand with the help of a diagrammatic representation. Ahead Cars Inc (Manufacturer based in Delhi) Fast Wheels (Distributor based in Delhi)

Zoom Ahead (Dealer based in Gujarat)

Fast Cars (Retailer based in Gujarat)

Consumer (Based in Gujarat)

1. Ahead Cars Inc. sells 1 piece @ Rs.110 to Fast Wheels, the distributor in Delhi (local sale within Delhi). Fast Wheels issues a ST Form and does not pay LST. 2. Fast Wheels sells the car parts @ Rs.125 to Zoom Ahead (inter-state sale between Delhi and Gujarat). Zoom Ahead issues Form C and pays CST @ 4%. 3. Zoom Ahead sells the car parts to Fast Cars @ Rs.135 (local sale within Gujarat). Fast Cars issues a ST Form and does not pay LST. 4. Fast Cars sells the car parts @ Rs.159 to the consumer (local sale within Gujarat). Fast Cars recovers the LST for Gujarat and CST paid from the consumer. Let us have a look at the cost price and selling price given here in the form of a table for the business entities in the chain. Elements /Busines s Entity Ahead Cars Inc (Manufacturer based in Delhi) 1 * 100= 100 Fast Wheels (Distribut or based in Delhi) 110 Zoom Ahead (Dealer based in Gujarat) 125 Fast Cars (Retailer based in Gujarat) 135 Consumer (Based in Gujarat)

Cost Price (manufact uring

159

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cost/Procur ement cost) Profit margin Selling Price LST (10%)

10 100 + 10 = 110 Receives ST Form from the buyer

10 110 + 10 = 120 Not required to pay LST since Delhi is not the state of final consumptio n 5 (rounded off to nearest rupee) 125 Sold goods against Form C and CST collected @ 4%

10 125 + 10 =135 Receives ST Form from the buyer

10 135 + 10 =145 Charges LST amounting to Rs. 14 (rounded off to nearest rupee) N.A.

N. A. N. A. N. A.

CST (4%)

N.A.

N.A.

N. A.

Total Tax recovered/ paid

110 Sold goods against ST Form

135 Sold goods against ST Form

145 + 14 =159 LST collected from the buyer and deposited with the government

N. A. LST and CST paid

The first transaction is a case of sale against ST Form while the second transaction is a case of tax payable sale. The third transaction is a case of sale against ST Form while the fourth transaction is a case of tax payable sale.
Important points to be remembered LST is always paid in the state of final consumption. In this case, Gujarat is the state of final consumption and LST will be paid in Gujarat. The local sale in Delhi does not require any LST to be paid. Thus, Fast Wheels issues a ST Form for Delhi and does not pay LST. ST Forms for CST i.e. Form C is required to differentiate between a registered dealer and the consumer. The consumer cannot issue ST Forms, thus he will pay CST at the appropriate rates. Registered dealer can issue ST Forms, thus he will issue C Form. In addition he will pay a minimum CST of 2% or 4%. This is because according to Central Government irrespective of whether a ST Form is issued, CST has to be paid at some percentage. The percentage of CST depends on specifications given by the government. In case a consumer purchases goods directly from a dealer based in another state then he will pay only CST. He will not be required to pay LST. For example, Mr. Ashok in Mumbai purchases goods worth Rs. 5,000 from ABC & Co. based in Delhi. Since this is a central sale, Mr. Ashok pays only CST amounting to Rs. 500.

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Under Central sales, there can be a case scenario that involves stock transfer between states for the same company. Such a case requires different treatment. Let us understand with the help of a case scenario.

Case Scenario for Stock Transfer


Fast Wheels, the distributor for Ahead Cars Inc., has a chain of outlets in and around Delhi. Goods are frequently transferred from one outlet in Delhi to another outlet in Gurgaon. Let us understand with the help of a diagrammatic representation. Fast Wheels Distributor for Ahead Cars Transfers goods Delhi Branch Issues Form F (0% CST) Gurgaon Branch

Delhi branch of Fast Wheels transfers stock worth Rs. 50,000 to the Gurgaon branch. This is an inter-state transaction in which no actual sale has taken place only goods have been transferred. For stock transfer cases, a special CST ST Form, Form F is issued. If Form F is issued then CST is not levied. Thus in this case, Gurgaon branch will issue a Form F and the Delhi branch will transfer the goods on Form F with 0% CST. Let us have a look at the cost price given here in the form of a table for the business entities in the chain. Elements/Business Entity Cost Price (manufacturing cost/Procurement cost) CST Total Tax recovered/paid Fast Wheels Delhi Branch 50,000 Fast Wheels Gurgaon Branch 50,000

Receives Form F with 0% CST 50,000 No tax to be collected since it is a stock transfer transaction

Issues Form F 50,000 No tax to be paid since it is a stock transfer transaction

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Overview of VAT
VAT is the abbreviated form for Value Added Tax. Value Added Tax as the name suggests, is an indirect tax calculated on the value added to the goods and services at each point in the production and distribution chain. It is charged as a percentage of prices, which means that the actual tax burden is visible at each stage in the production and distribution chain. VAT applies to all commercial activities involving the production and distribution of goods and the provision of services. Over 130 countries worldwide have introduced VAT over the past three decades and India is amongst the latest few to introduce it.

VAT in Indian Economy


VAT has replaced the local sales tax (LST) system in India in various states. Presently, the tax system in India is a combination of sales tax and VAT. For interstate sales, Central Sales Tax (CST) is in place with plans of replacing it by VAT in the near future. In case of local sales, many states have adopted VAT while there are still few states that are using the old Local Sales Tax system. The primary difference between Sales Tax and VAT is in the way tax is levied. In case of Sales Tax, the tax is generally levied at either the first point or the last point in the production and distribution chain. It is therefore a single-point tax system. In case of VAT, the tax is levied at each point in the production and distribution chain. Thus, VAT is a multi-point tax system. VAT can be computed using different methods. These methods are discussed here.

Methods for calculating VAT


VAT can be computed by using any of the three methods explained here. Subtraction Method: According to this method, the tax is calculated on the difference between the value of output and the cost of input. Let us understand with the help of an example. ABC & Co. purchases goods (inputs) worth Rs. 10,000. It sells the goods at Rs. 20,000. The difference between the cost of input and value of output is the value added by the company. In this case, the value added by ABC & Co. is Rs. 10,000 (20,000 10,000). Thus, VAT will be computed by applying the appropriate tax rate on Rs. 10,000. Addition Method: According to this method, the value added is computed by adding all the payments that are payable to the factors of production such as wages, salaries, and interest payments and so on. Tax Credit Method: According to this method the tax paid on purchases is set-off against tax collected on sales.

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In India, the Tax Credit method is followed. VAT is calculated on both the purchase and sale transactions in the chain of production and distribution of goods and services with the provision for a set-off for the tax paid at earlier stages in the chain. Let us understand the calculation of VAT with the help of an example. Ahead Cars Inc. is a car parts manufacturer. In the month of May 2005, Fast Wheels Inc., a dealer based in Delhi purchased car parts from Ahead Cars Inc. On this purchase, a tax of Rs 10 has been paid. Further Fast Wheels Inc. sells the toys to a retailer and collects tax amounting to Rs.11. For Fast Wheels Inc., the net tax payable/receivable will be the difference between the tax collected on sales and tax paid on purchase. Thus, net tax payable is Re. 1 being the difference between tax collected, Rs. 11, and tax paid, Rs. 10. In case of VAT, by applying the tax rate on the value added to the goods at the sale transaction stage we can check whether the net tax payable/receivable amount is the correct amount. Fast Wheels Inc. made a value addition of Rs. 10 to the toys. Thus, Fast Wheels Inc. has to pay tax @10% on the value addition of Rs. 10. This tax amounts to Re. 1. This amount is equal to the tax amount computed by the tax credit method.
Note: For this example, we assume that the manufacturer has not paid any tax on the purchases. This is done to simplify the example.

Given here is a table containing the data on the cost price and tax paid for the different business entities in the chain of transaction. Elements/Busines s Entity Cost Price (manufacturing cost/Procurement cost) Profit margin/ Value Added Selling Price VAT (10%) Total Tax paid on purchase Tax collected (payable) on sales Net VAT payable (Tax Collected Tax Paid) Ahead Cars Inc (Manufacturer) 90 Fast Wheels (Distributor based in Delhi) 100 (do not include VAT paid on purchase in the cost) 10 100 + 10 = 110 11 (rounded off to nearest rupee) 110 + 1 = 121 10 11 11-10=1 Today Cars (Dealer based in Delhi) 110 (do not include VAT paid on purchase in the cost) 10 110 + 10 =120 12 (rounded off to nearest rupee) 120 + 12 =132 11 12 12-11=1

10 90 + 10 = 100 10 100 + 10 =110 N.A 10 10

Note: An important point to remember in computing VAT is that while computing VAT, do not include the VAT paid at earlier stages in the cost of goods. In the scenario explained here, Fast Wheels paid tax amounting to Rs.10 on the purchase of goods. Further, while computing tax on the sale of the goods, it did not include tax paid, Rs. 10 in the cost of goods. It included only the cost and the profit margin/value added in the selling price and computed VAT on it.

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Under this method the dealers can deduct the amount of tax paid by them on purchase from the tax collected on sales, thereby paying the balance amount to the Government as tax. The objective of levying a multi-stage tax with the provision for set off is to avoid 'cascading' or multi taxation, which can have a snowballing effect on prices. The mechanism of VAT is such that the first seller of goods pays the first point tax and the next seller pays tax only on the value-addition done. If we add up the net tax paid at each stage then the total tax will be equal to the tax burden if we had taxed the transaction at the first or last point of sale only. There are few typical terms used in VAT that we need to know. Let us discuss these terms.

Terms used in VAT


The terms used in VAT are: Tax Payers Identification Number (TIN) Input Tax Credit Output Tax Net Tax Payable/Receivable Invoice Tax Payers Identification Number Tax Payers Identification Number, popularly known, as TIN is the registration number allotted to a dealer registered under the Value Added Tax (VAT) Act. The Sales Tax Department issues TIN to the registered VAT dealer. Input Tax Credit Input refers to the goods purchased by a dealer for resale or for further manufacturing, processing, or packing of good manufactured by the dealer. Thus, Input tax is the tax paid on the purchase of goods (inputs) by a dealer and on purchase of raw materials by a manufacturer. Further, Input tax credit (ITC) refers to the tax paid by a dealer on purchase of goods from VAT registered dealers. The significance of ITC is that the dealer can deduct ITC from the tax collected on sales and then pay/receive the balance amount to the government accordingly. To reiterate, Input Tax Credit is the input tax paid on purchases of goods from within the state during the tax period from VAT registered dealers that are used: For sales within the state / inter-state sale or export out of India. As Raw Material or Capital Goods in manufacturing or processing of goods other than those exempt from tax under this Act For use as containers for packing of goods other than those exempt from tax Output Tax Output refers to the finished products or goods sold by a dealer or manufacturer. Output tax is the tax collected by a dealer or manufacturer on the sale of goods. This tax is payable to the government.

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Net tax payable/receivable Net tax payable/receivable is calculated as: Net tax payable/receivable = Output Tax Input Tax Credit Let us understand with the help of an example. We will continue with the case scenario of Ahead Cars discussed in the previous topic. In the month of May 2005, Fast Wheels Inc., a dealer based in Delhi purchased car parts from Ahead Cars Inc. On this purchase, a tax of Rs 10 has been paid. Further Fast Wheels Inc. sells the toys to a retailer and collects tax amounting to Rs.11. For Fast Wheels Inc., the net tax payable/receivable will be the difference between output tax and input tax. Thus, net tax payable is Re. 1 being the difference between the output tax, Rs. 11, and input tax, Rs. 10. Similar is the case for Today Cars where the net tax payable is Re. 1 being the difference between the output tax, Rs. 12, and input tax, Rs. 11. Given here is a table containing the data on the cost price and tax paid for the different business entities in the chain of transaction. Elements/ Business Entity Cost Price (manufacturing cost/Procurement cost) Profit margin/ Value Added Selling Price VAT (10%) Total Input Tax Output Tax Net tax payable/receivable (Tax Collected Tax Paid) Ahead Cars Inc (Manufacturer) 90 Fast Wheels (Distributor based in Delhi) 100 Today Cars (Dealer based in Delhi) 110

10 90 + 10 = 100 10 100 + 10 =110 N.A 10 10

10 100 + 10 = 110 11 (rounded off to nearest rupee) 110 + 1 = 121 10 11 11-10=1

10 110 + 10 =120 12 (rounded off to nearest rupee) 120 + 12 =132 11 12 12-11=1

Note: For this example, we assume that the manufacturer has not paid any input tax on the purchases.

The essence of VAT is in providing set-off for input tax through the concept of input tax credit. According to this concept, the amount of input tax paid by a registered dealer is set-off against the amount of output tax. The resultant amount represents the VAT liability or the net tax payable/receivable by the dealer. There can be two broad cases possible with Net tax payable. These are:

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Net Tax Payable: If the output tax is more than the input tax, the dealer will need to pay the difference to the government. In this case, net tax payable amount will be a positive amount. Net Tax Receivable: If the input tax is more than the output tax, the dealer can claim the balance from the government. In such a case, net tax payable will be a negative amount. Thus it can be called net tax receivable. The dealer can take the refund in two ways: o The dealer can carry forward the net tax receivable amount and adjust it against the output tax in the subsequent months. Let us understand with the help of an example. Suppose in month of April, net tax receivable is Rs. 20,000. But only Rs. 10,000 net tax was refunded. Now the balance of Rs. 10,000 net tax can claimed in the next return. o The dealer can get the refund of the net tax receivable from the government at the end of the current or next year.

Invoice Invoice, popularly known as a bill, is a claim raised by the seller of the goods on the buyer of the goods in respect of the goods sold. It provides complete detail of the goods sold by the seller. There are primarily two types of invoices: Tax Invoice This invoice is issued when a registered dealer sells goods to another registered dealer for: o Resale o Manufacture or processing of goods for sale Retail Invoice This invoice is issued when a dealer, registered or unregistered sells goods to an unregistered dealer or a consumer. The significance of Tax invoice in VAT is that the entire design of VAT and input tax credit is based on documentation of tax invoice, cash memo, or bill. The dealer can claim input tax credit only when the goods are purchased on a tax invoice. Let us understand with the help of an example. Fast Wheels Inc. purchased good worth Rs. 50,000 each from a registered dealer on a tax invoice and an unregistered dealer on a retail invoice. VAT amounting to Rs. 5,000 has been paid on both the purchases. Now Fast Wheels sold goods worth Rs. 1,00,000 to a registered dealer and VAT amounting to Rs. 10,000 is collected. In this case, the input tax credit will be Rs. 5,000. This amount pertains to the input tax paid on the tax invoice purchase. The output tax is Rs. 10,000. Thus net tax payable is 5,000 (10,000 5,000). We have so far, discussed VAT with respect to the methods used for calculating VAT along with the common terminology used in VAT. Now let us summarize the differences between Sales Tax and VAT, which will help us in understanding the relevance of implementing VAT.

Comparison of Sales Tax and VAT


The differences between sales tax and VAT are listed here in form of a table.

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Basis Point of Levy Sales Tax Sales Tax system is a Single point tax system where tax is generally levied at the first or last point of sale. Sale can be made against Sales Tax Forms. The amount of tax levied at each point of purchase or sale is not visible. The procedure of filing returns, payment of tax, furnishing declaration and assessment is long and tiresome. Tax paid is included in the cost. Thus, tax becomes a part of cost of doing a business. Sales Tax system is complex and induces noncompliance. Since the tax paid/payable is not visible at each stage, it is possible to avoid paying tax. This form of tax evasion is an obstacle in the growth of the economy. Moreover, it also leads to loss of revenue for the government. The inputs are taxed before a commodity is produced and the output is taxed after it is produced. This leads to double taxation with cascading effects. Under Sales tax, different rates of tax are applicable on different goods. VAT VAT is a Multi point tax system where tax is levied at each point in the chain of transactions. In VAT, there is no provision for selling against Forms. The amount of tax levied at each point of purchase or sale of goods is visible. The procedure of filing returns, payment of tax, furnishing declaration, and assessment is simplified under the VAT system. Tax paid is not included in the cost. Thus, tax is not a part of cost of doing a business. VAT is a simple and transparent system. The tax liability is clearly visible at each stage that makes it difficult to evade tax liability.

Sale against Forms Visibility of tax levied Simplification of Procedure

Tax included in the cost

Tax Avoidance (Noncompliance)

Double taxation (Cascading effect)

Uniform tax rates

VAT helps in eliminating the cascading effect of tax. This is done through the provision of set-off against input tax, which leads to reduction in overall tax burden. VAT has uniform tax rates across the state that simplifies the process of taxing. The two basic rates are 4% and 12.5%

Till now we have discussed VAT on a broad level wherein the methods, terms, and differences between Sales Tax and VAT have been discussed.

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Now we will discuss the tax rates applicable in VAT and the special cases in VAT for some types of goods and transactions.

VAT Rates
According to the White Paper, there are 550 categories of goods under the VAT system. They are classified into the four categories depending on the tax rate: VAT @ 1% - This category covers specific category of goods such as gold, and silver. VAT @ 4% - This category covers the largest number of goods (270) comprising of basic necessity items such as drugs and medicines, agricultural and industrial inputs, and capital goods. Exempted goods - There are about 46 commodities under the exempted category. The exempted goods include natural and unprocessed products in unorganised sector as well as items that are legally barred from taxation. VAT@12.5% - This category covers the remaining commodities.
Note: There are few goods that are not covered under VAT. These items will continue to be taxed under the sales tax act of the respective states. Some examples are lottery tickets, petroleum products, and so on.

Currently, the sales tax system is an intricate combination of Central Sales Tax and VAT. This intricacy leads to special cases involving different treatment of some goods and transactions. Let us discuss these cases in detail.

Special Cases in VAT where input tax credit cannot be claimed


Input Tax Credit is not allowed in the cases listed here: Goods purchased from an unregistered dealer Goods purchased from another state (inter-state purchase) Goods purchased for the manufacture, processing, or packing of goods that are exempt from tax.

Goods purchased from an unregistered dealer Goods are purchased from an unregistered dealer on a retail invoice. We know that input tax credit can be claimed only on purchases with a tax invoice. Thus in this case scenario, no input tax can be claimed. Goods purchased from another state (inter-state purchase) Let us understand this case with the help of an example. A Delhi based dealer purchased goods worth Rs. 50,000 and paid CST amounting to Rs. 5,000. For the input CST that he has paid on the purchase of goods he is not eligible for input tax credit. In other words, he cannot adjust the output tax against the input CST. Goods purchased for the manufacture, processing, or packing of goods that are exempt from tax. In case an exempted good is sold then the input tax paid on the inputs cannot be claimed. Let us understand with the help of an example. Book World is a book-publishing firm. The firm purchased paper @ Rs.100/kg and paid VAT @12.5% amounting to Rs.

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12.5. Now they publish a book using that paper and sell in the market. Since books are exempted from VAT hence no VAT is charged. According to the government, if the finished products are exempted from VAT then the firm cannot claim any tax credit paid on raw material. Thus, Book World cannot claim any VAT from the government. In such a case the net tax payable will be equal to the output tax. We have discussed the cases where Input Tax Credit cannot be claimed at all. Now let us discuss the special cases where Input Tax Credit can be claimed fully or partially.

Special Cases in VAT where input tax credit can be claimed fully or partially
Input Tax Credit can be claimed fully or partially in the cases listed here: Stock transfer/Consignment basis sale Capital Goods Goods purchased for export Stock brought forward from previous period

Stock transfer/Consignment basis sale In case of inter-state stock transfer, input tax paid in excess of 4% is liable for tax credit. Let us understand with the help of an example. ABC & Co. purchases goods worth Rs. 10,000 and paid VAT @12.5% amounting to Rs. 1250. After few days, the company makes a stock transfer from its Delhi outlet to Gurgaon outlet. The goods are sold in Gurgaon @ Rs. 20,000 with VAT @12.5% amounting to Rs. 2500. In case of stock transfer, the input tax rate over and above 4% can be claimed from the government. Thus in this case the input tax credit is Rs. 850 i.e. 8.5% (12.5 4) on Rs. 10,000 while the output tax is Rs. 2500. Thus the net tax payable is Rs. 1650 (2500 850). Capital Goods Traders and manufacturers can claim input tax paid on capital goods. Input tax credit on capital goods can be adjusted over a maximum of 36 equal monthly installments. Let us understand with the help of an example. Machinery worth Rs. 50,000 has been purchased for business purpose. At the time of purchase input tax amounting to Rs. 5,000 has been paid. Now input tax credit can be claimed from the government in instalments. Thus in this case the net tax receivable is Rs. 5,000. Goods purchased for Export Goods that are purchased for the purpose of export are eligible for input tax credit. For the goods that are exported, input tax will be refunded in full, and this refund will be made within three months. Units located in SEZ (Special Economic Zone) and EOU (Export Oriented Unit) will be granted either exemption from payment of input tax or refund of the input tax paid within three months. Stock brought forward from previous period

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All tax-paid goods purchased on or after April 1, 2004 and still in stock (Opening Stock) as on April 1, 2005 will be eligible to receive input tax credit, subject to submission of requisite documents. Let us understand with the help of an example. Tax amounting to Rs. 15,000 has been paid in the previous year on purchase of stock. In this case, input tax credit amounts to Rs. 15,000 and it can be claimed. Thus, input tax credit will be allowed for sales tax already paid in the previous year. This input tax credit will be given in six monthly instalments after a period of 3 months needed for verification. Till now we have discussed the working of VAT in mainly a local scenario. Now we will discuss the working of VAT in combination with Central Sales Tax.

Working of the combined system of Central Sales Tax and VAT


To amalgamate Central Sales Tax with VAT, certain rules and regulations have been specified. These rules and regulations ensure smooth functioning of the tax system in India. Let us discuss these rules and regulations with the help of an example. Blue Bags is a bag manufacturing and distributing company based in Delhi. In April 2005, Blue Bags purchased raw material worth Rs. 50,000 from a seller based in Maharashtra. Since this is an inter-state transaction (central purchase), CST @ 10% amounting to Rs. 5,000 has been paid. Further, Blue Bags processes the raw material and produces 100 bags worth Rs. 700 each. The company sells these bags in Gujarat itself and collects output tax @ 10 % amounting to Rs. 7000. In this case the various tax payable/receivable amounts are: Tax head Input tax credit (Local Purchase) Output Tax (Local Sales) Net tax payable Input CST (Central Purchases) Amount 0 7,000 7,000 (7,000 0) 5,000

We cannot adjust the Input CST against the net tax payable. The reason is that Input CST is to be paid to the government and is a part of the cost to the business. It cannot be claimed or refunded like Input tax paid on local purchases can be. This is an important rule in the working of the combined tax system in India. Let us understand this further with some modification in the case scenario. In the month of May 2005, Blue Bags sold bags worth Rs. 80,000 to Bags Inc., their distributor in Gujarat. Since this is an inter-state transaction (central sale), CST 2 10% amounting to Rs. 8,000 has been collected by Blue Bags. In May, the input tax paid on local purchases amounted to Rs. 10,000 while the output tax on local sales amounted to Rs. 2,000. In this case scenario, the various tax payable/receivable amounts are: Tax head Input tax credit (Local Purchase) Output Tax (Local Sales) Net tax payable Amount 10,000 2,000 -8,000 (2,000 10,000)

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Output CST (Central Sales) 8,000

Net tax payable is 8,000 (negative figure), which means that net tax is receivable from the government. Further Output CST (Central sales) is Rs. 8,000, which means that this amount is payable to the government. In such a case, the government allows us to adjust the receivable and payable amounts against each other. Net tax payable/receivable = Output CST Net tax receivable = 8,000 8,000 =0 Thus, under Central Sales Tax system there is no provision for setting off input tax against output tax. The input CST is a liability for the purchaser and has to be borne by him in any case. Output CST can only be adjusted against net tax payable to avoid unnecessary payment and receipt of tax. Now that we are familiar with the working of the sales tax system in India, let us summarize the key points (rules and regulations) in the working of the sales tax system in India. In Local transactions, Input tax credit on purchases can be claimed and subsequently adjusted against Output tax on sales. In Central transactions: Input CST on purchases cannot be claimed or adjusted. It is a part of the cost and has to be borne by the purchaser of the goods. Output CST on sales can be adjusted if the net tax payable (Output tax Input tax) is negative. In other words, if net tax on local transactions is receivable from the government then we can adjust it against Output CST. This is done to avoid unnecessary give and take of money between the government and the dealers. Now that we have understood the concept of Sales Tax and VAT, let us discuss the implementation of the same in BUSY.

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Implementation of Sales Tax & VAT Reporting


The implementation of Sales Tax & VAT Reporting in BUSY is a simple four-step process. The steps are: 1. Configure Sales Tax & VAT 2. Create Masters 3. Record Sales Tax & VAT Using Vouchers 4. View Sales Tax & VAT Reports Let us discuss the steps in detail.

1. Configure Sales Tax & VAT


The first step is to configure Sales Tax & VAT in BUSY. There are three sub-steps in configuring Sales Tax & VAT. The sub-steps are: 1.1 Enable Sales Tax & VAT Reporting 1.2 Configure Sales Tax & VAT Reporting Account-wise

1.1 Enable Sales Tax & VAT Reporting


To enable Sales Tax & VAT Reporting in BUSY, perform the following steps: Open the company you want to configure Sales Tax Reporting for by clicking Company Open Select your company Click the Administration Menu: Click Configuration Features/Options Sales Tax and VAT Enable the option Enable Sales Tax & VAT Reporting by selecting the check box and enter the appropriate details in the data fields that become active.

Given here is a screenshot of Features/Options Window for enabling Sales Tax Reporting in BUSY.

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After you enable Sales Tax Reporting in BUSY, certain data fields become active. Enter the appropriate data in the data fields. To enable Sales Tax Surcharge, specify Y in the Enable Sales Tax Surcharge data field. On enabling Sales Tax Surcharge, a Configure button next to the Enable Sales Tax Surcharge data field appears. Click the Configure button to configure Sales Tax Surcharge On clicking the Configure button, a Sales Tax Surcharge Configuration Window appears. Given here is a screenshot of the Sales Tax Surcharge Configuration Window.

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Enter the appropriate data in the data fields. There are certain data fields that are active by default while other get activated based on the values. The data fields active by default are: Surcharge Percentage Enter the percentage of surcharge that you want to levy Item-wise surcharge to be calculated on Under this heading there are three options of Tax Amt., Item Basic Amt, and Item MRP. Select the option suitable for you. Enable in Local Sales Specify Y if you want to enable surcharge in locale sales. If you specify Y then two more data fields become active. These are o Surcharge Bill Sundry Specify the bill sundry to be used for Sales Tax Surcharge o Freeze for Local Sales Specify Y here if you want the surcharge to be levied under any condition for all local sales.
Note: If you specify Y in this data field, Busy will perform a check when you are entering a local sales voucher for a surcharge bill sundry. If you forget to attach a surcharge bill sundry then Busy will prompt you to attach the appropriate bill sundry. You will not be able to save the voucher without attaching the surcharge bill sundry.

Similarly, you have options for enabling sales tax surcharge in Local Purchase, Central Sales and Central Purchase. Click the Save button to save the Surcharge configuration settings To create Default Masters in VAT, click the Create Default Masters button On clicking the Create Default Masters button, a Create Default Masters for VAT Message Box appears.

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Note: Default Masters are those Masters that Busy creates for implementing VAT in Busy. For example, Busy creates bill sundry, account, sales or purchase type for VAT.

Click the Yes button to create the default masters for VAT. On clicking the Yes a Default VAT Masters Message Box appears. Click the Ok button to return to the Features/Options Window Click the Save button to save the configuration settings for Sales Tax & VAT

1.2 Configure Sales Tax Reporting Account-wise


After Sales Tax Reporting is configured in BUSY, you need to configure Sales Tax Reporting account-wise for sundry debtors and sundry creditors. To configure an account for Sales Tax Reporting, perform the following steps: Click the Administration Menu Masters Account Add In the Account Master Add Window, enter the appropriate information in the data fields.

Given here is the screenshot of the Account Master - Add Window.

Enter the LST No. and CST No. for Sundry Debtors and Creditors.

When you specify the Group as Sundry Debtors or Sundry Creditors then enter the LST No. and other sales tax related details for the account. Click the Save button to save the account information. Now that you have configured Sales Tax in BUSY, you can create masters that are necessary for recording sales tax related details.

2. Create Masters

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To enter and maintain sales tax related details, you need to create certain masters. The masters to be created are: 2.1 Sale/Purchase Type 2.2 ST Form Let us discuss the two masters in detail.

2.1 Sale/Purchase Type


A Sale/Purchase Type is classification of sale/purchase based on the type of sale/purchase (central or local) and the rate of sales tax charged. This classification is required for the purpose of reporting. Certain Sale/Purchase Types are created by default at the time of creation of a company. These can be modified or deleted as per your requirements. To create a Sale/Purchase Type, perform the following steps: Click the Administration Menu Masters Sale/Purchase Type Add In the Sale Type Master Add Window, enter the appropriate information in the data fields.

Given here is the screenshot of the Sale Type Master - Add Window.

There based Sale Type

are certain data fields that are active by default while other get activated on the values. The data fields/Options Boxes active by default are: Sale Type Sales Account Taxation Type For Printing in Documents Region

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In this data field, enter the name of the Sales Type that you want to create.
Note: While naming the sale type keep in mind that the name should reflect the properties of the sale type. For example if you are creating a sale type for central sale against ST Form and with 10% CST applicable then you can give a name Central 10%. Such a naming convention ensures that it is easy to recognize which sale type is applicable in a particular case.

Sales Account In this data field, enter the name of the Sales Account that you want to affect by the transaction. For example, Fast Wheels Inc. is a dealer in car parts. It wants to create sale types for two types of goods. For this purpose it creates two sale types, one for semi-processed goods and one for processed goods. Since it maintains separate sales account for the two types of goods it specifies the respective sale account for the sale types. Taxation Type In this o o o o o o option box, you need to select one of the following options: Tax Paid Select this option if tax has been levied on sale already Taxable - Select this option if tax has to be levied on sale Against ST Form - Select this option if sale is against ST Form Exempt - Select this option if sale is exempt from tax Tax Free - Select this option if sale is tax free Multi-Tax - Select this option if you want to record sale of different items with different rates of sales tax in a single voucher

Note: When you are creating a Sale Type then two options of Un-registered Dealer and Lump-sum Dealer are NOT ACTIVE. The reason is that under sales tax system irrespective of whether you are selling to an un-registered dealer/lump-sum dealer/customer you do not distinguish between them and will charge tax as per regular sale. Thus for such sales you will specify the Taxation Type as Taxable. When you are creating a Purchase Type then these two options are ACTIVE. The reason is that when you purchase goods from an un-registered dealer or lump-sum dealer, you will pay sales tax. For your convenience you can distinguish between the two types of dealer regarding the number of purchases made from each.

For Printing in Documents In this option box, there are two data fields: o Invoice Heading Enter the heading of the invoice that you want to be displayed on the invoice o Invoice Description Enter the description of the invoice that you want to be displayed on the invoice. Region In this option box, you need to select one of the following options: o Local Select this option if sale is within the state o Central - Select this option if sales is between two states (inter-state sale) The data fields/Options Boxes that get activated based on values are:

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Calculate Tax on Item MRP Tax inclusive Item Price Tax Invoice Tax Bill Sundry Type of Central Transaction Form Information Tax Calculation

Calculate Tax on Item MRP In this data field specify Y if you want to calculate tax on Item MRP. This data field is activated when you select the Taxation Type as Multi-Tax. Tax inclusive Item Price In this data field specify Y if you want to display the item price in the invoice inclusive of tax. Enabling this option allows you to do MRP Billing. In other words, if you enable this option then you need to enter only the quantity, price and tax rate for the item. BUSY will calculate the tax automatically by doing reverse calculation. Let us understand with the help of an example. You want to specify a standard rate for all the items of a particular category. The problem is that the rate of tax is different for all the items. To simplify the situation, you can enable this option and specify the price and tax rate for all the items. In this way you need not calculate the tax per item. On enabling Tax Inclusive Item Price option another data field, Hide Item Tax Rate Window, becomes active. If you specify N then while entering the voucher an Itemwise Tax Rates Window appears wherein you can specify the tax rate for the item. If you specify Y then the Item-wise Tax Rates Window does not appear. In such a case you need to specify the tax rate in the Item Master. On disabling Tax Inclusive Item Price option another data field Calculate Tax On field becomes active. Enter in this field the percentage of amount on which tax is to be calculated. This data field is activated when you select the Taxation Type as Multi-Tax. Tax Invoice In this data field specify Y if you want that the invoice that is billed in the sale type is Tax Invoice. If you specify N then the invoice that is billed is Retail Invoice. The distinction between the two types of invoices is that on Tax Invoice the seller can claim input VAT whereas on Retail Invoice he cannot claim input VAT. This data field is activated when the Taxation Type is Multi-Tax/Taxable. Tax Bill Sundry In this data field, specify the bill sundry to be used when you are levying tax on the voucher. This data field is a part of the Tax Calculation Option Box and it gets activated when the Taxation Type is Multi-Tax/Against ST Form/Taxable.

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Type of Central Transaction In this option box, there are three options that specify the type of central transaction. Select one of the following options: o Stock Transfer o Export o Others This option box is activated when the Central option is selected under Region option Box. Form Information In this option box, you need to enter details for the following data fields: o Issue ST Form Specify Y in this data field if you want to issue a ST Form for the sale voucher o Form Issuable This data field is activated if you have specified Y in the previous data field. Select the form to be issued from the list that is displayed in the data field. o Receive ST Form Specify Y in this data field if you can receive a ST Form for the sale voucher o Form Receivable This data field is activated if you have specified Y in the previous data field. Select the form to be received from the list that is displayed in the data field. This data field is activated when you select the Taxation Type as Against ST Form. Tax Calculation In this option box, you need to enter details for the following data fields: o Tax (%) You can specify a default tax rate for the tax bill sundry. If you do not want to specify any tax rate then you can leave this field blank. o Tax Bill Sundry Specify the tax bill sundry to be used for levying tax on the sale voucher. You cannot leave this field blank. o Freeze Tax in Sales Specify Y in this data field if you want to attach the tax bill sundry for levying tax in all cases of sales. If you specify Y then you cannot save a sale voucher without attaching the tax bill sundry. o Freeze Tax in Sales Return Specify Y in this data field if you want to attach the tax bill sundry for levying tax in all cases of sales return. If you specify Y then you cannot save a sale return voucher without attaching the tax bill sundry. This option box is activated when you select the Taxation Type as Taxable/Against ST Form.

2.2 ST Form
ST Form is an abbreviation for Sales Tax Declaration Forms. These forms are used under the Sales tax System. You can create ST Forms according to your requirement. Some ST Forms are created by default at the time of creation of a company. These can be modified or deleted as per your requirement.

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To create a ST Form, perform the following steps: Click the Administration Menu Masters ST Form Add In the Form Master Add Window, enter the appropriate information in the data fields.

Given here is the screenshot of the Form Master - Add Window.

There are three data fields that are active by default in the Form Master Add Window. The active data fields are: Name Print Name ST Reg. Type Name In this data field, enter the name of the form that you want to create. Print Name In this data field, enter the print name for the form. Print Name refers to the name that appears on documents given to external parties such as sales invoice, receipt, debit note and so on. By default, the name entered in the Name field is displayed as Print Name. You can leave this field blank if you do not want any name to appear on the printed Reports. ST Reg. Type In this data field, select one of the three options that are displayed. The three options are: o Local Select this option if the form is for local transactions o Central Select this option if the form is for central transactions o ST-37 Select this option if the form is for Delhi only with VAT enabled Now that you have created masters for Sales Tax in BUSY, you can record sales tax related transactions using vouchers.

3. Record Sales Tax Using Vouchers


If you have paid/received sales tax on sale/purchase of goods then you can enter sales tax related details in the appropriate vouchers. To record sales tax related details perform the following steps:

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Click the Transactions Menu Select the appropriate voucher Enter appropriate information in the voucher and save the voucher Click the Transactions Menu Select the appropriate voucher for Forms Received/Forms Issued Enter appropriate information in the voucher and save the voucher

Let us understand the recording of sales tax with the help of an example. Fast Wheels Inc. is a dealer in car parts based in Delhi. It sold car parts to Today Cars, a dealer based in another state. Moreover, Fast Wheels Inc. collected sales tax at 10% and surcharge at 10% on sales tax. Given here is a screenshot of the sales voucher that Fast Wheels Inc. enters for sale of car parts.

Note: If you do not attach the Tax Bill Sundry as specified in the Sale Type (Central 10%) then Busy will display a Message Box asking you whether to continue without the tax bill sundry. In such a case, you can save the voucher with or without the tax bill sundry.

Click the Save button to save the voucher. On clicking the Save button a Sales Tax/Excise Reporting Details Window appears.

Given here is a screenshot of the Sales Tax/Excise Reporting Details Window.

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There are three active data fields that appear in the Sales Tax/Excise Reporting Details Window. These are: Description of Items Total Qty. Form DVAT 34 No. Let us discuss these data fields in detail. Description of Items In this data field, enter the description of the item sold. If you do not want to give a description for the item then you can leave this field blank. Total Qty. In this data field, enter the quantity of goods sold that you want to display in Sales tax & VAT Reporting. By default, the quantity specified in the voucher is displayed in the data field. Form DVAT 34 No. In this data field, enter the details of road permit, if any. This information is required for generating the Form DVAT report.
Note: If you enter a purchase transaction involving sales tax then a Sales Tax/Excise Reporting Details Window appears on clicking the Save button. This window has active data fields such as Purchase Bill Number, Purchase Bill Date, and Description of Items. You can enter the appropriate information in the data fields since this information is required for Sales Tax Reporting.

Click the Ok button to close the Sales Tax/Excise Reporting Details Window. On clicking the Ok button a ST Forms Details Window appears.

Given here is a screenshot of the ST Forms Details Window.

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Note: ST Forms Details Window appears for the sale voucher because in the Sale Type (Central 10%) the Taxation Type is defined as Against ST Form. If the Taxation Type is an option other than Against ST Form then this window will not appear.

There are two data fields that appear in the ST Form Details Window. These are: Form Issuable Amt. Form Receivable Amt. Let us discuss these data fields in detail. Form Issuable Amt. In this data field, enter the amount for which the Form is issuable. By default, the total amount of transaction is entered in this data field. Form Receivable Amt. In this data field, enter the amount for which the Form is receivable. By default, the total amount of transaction is entered in this data field.
Note: Depending on the configuration in sale/purchase type under Form Information Option Box either Form Issuable Amount or Form Receivable Amount or both the data fields will be active. In the screenshot given above, since the sale type configuration allows the form to be issued as well as received both the fields are active in the window. Typically speaking, Form Issuable Amount data field will be active for purchase transactions and Form Receivable Amount data field will be active for sales transactions.

Click the OK button to close the ST Forms Details Window and save the sale voucher.

Now that you have entered the sale voucher for the sale transaction, you need to enter a Form Received transaction for the form that is received from Today Cars. Given here is a screenshot of the Forms Received Add Window that Fast Wheels Inc. enters for receipt of the appropriate form.

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There These

are certain data fields that appear in the Forms Received Add Window. are: Date Form Form No. Party Narration Bill No./Dated/Amount

Date In this data field, enter the date on which the Form is received. Form In this data field, select the Form that you have received from your customer. You can select from the list of ST Forms displayed in the data field. Form No. In this data field, enter the number that is printed on the Form. Form number is a unique number of the Form. Party In this data field, select the party from whom you have received the Form. Narration In this data field, enter the narration giving a brief description of the transaction. Bill No./Dated/Amount In this data field, select the appropriate form details from the list that is displayed in the grid.

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Note: On selecting the appropriate form details, the details for Bill No, Dated, and Amount are automatically entered in the data field.

Click the Save button to save the Forms Received voucher

4. View Sales Tax Reports


Once you have recorded sales tax and VAT related transactions, you can view the Sales Tax & VAT related reports and returns. To view the Sales Tax & VAT Reports, perform the following tasks: Click Display Menu Sales Tax & VAT Reports Select a report from the following options: ST Form Reports o Forms Receivable o Forms Issuable o Forms Received Register o Forms Issued Register Sales Tax Summaries o Sale Type Summary o Purchase Type Summary o Sales Tax Summary o Purchase Tax Summary Sales Tax Account Register State-specific Sales Tax Register VAT Summaries o VAT Summary o VAT Computation o Party-wise Sales VAT Summary o Party-wise Purchase VAT Summary o Item-wise Sales VAT Summary o Item-wise Purchase VAT Summary o Party-wise Sales CST Summary o Party-wise Purchase CST Summary o Item-wise Sales CST Summary o Item-wise Purchase CST Summary VAT Registers o Sales Registers o Purchase Registers State-specific VAT Reports Tax Paid Stock Detail Given here is a screenshot of the Sales Tax & VAT Reports menu options.

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Enter the date range in Starting Date and Ending Date fields/Select the appropriate option to generate the report View the respective Sales Tax & VAT Report

Given here is a brief description for each of the Sales Tax & VAT Reports. In the ST Form Reports, four options appear. Let us discuss these options in detail.

Forms Receivable
Forms Receivable Report contains details of the forms that are receivable from customer or parties. It contains details such as party, bill number, type, dated, form amount, and form.

Forms Issuable
Forms Issuable Report contains details of the forms that are issuable to suppliers or parties. It contains details such as party, bill number, type, dated, form amount, and form.

Forms Received Register


Forms Received Register contains details of all the form receipt transactions. It contains details such as serial number, name of party, address of party, serial number of forms, date of receipt and so on.

Forms Issued Register


Forms Issued Register contains details of all the form issue transactions. It contains details such as serial number, name of seller, address of seller, serial number of forms, date of issue and so on. This register is also known as Forms Utilisation Register.

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In Sales Tax Summaries four options appear. Let us discuss these options in detail.

Sale Type Summary


Sale Type Summary Report contains details of all the sale types that have been used in sales/sales return transactions. This report provides the summary on sales and sales return for a specific sale type. All the sales/sales returns belonging to specific sales type (C-10%, L, L-8% and so on) are grouped together. Let us understand with the help of an example. There are two Sale Types, A and B. In such a case, under this report the sale/sales return will be grouped under separate headings of A and B. It contains details such as name of form, sales amount, tax amount, sales return amount, sales type name, sales tax surcharge, nett sales and so on.

Purchase Type Summary


Purchase Type Summary Report contains details of all the purchase types that have been used in purchase/purchase return transactions. This report provides the summary on purchase and purchase return for a specific purchase type. All the purchase/purchase returns belonging to specific purchase type (C-10%, L, L-8% and so on) are grouped together. Let us understand with the help of an example. There are two Purchase Types, A and B. In such a case, under this report the purchase/purchase return will be grouped under separate headings of A and B. It contains details such as name of form, purchase amount, tax amount, purchase return amount, purchase type name, sales tax surcharge, nett purchase and so on.

Sale Tax Summary


Sale Tax Summary Report contains details of all the sale and sales return transactions on which sales tax has been paid. It provides the summary on sales and sales return for a specific tax rate. All the sales/sales return belonging to a specific tax rate (5%, 10% and so on) and a specific region (Central/Local) will be grouped together irrespective of different sale types. Let us understand with the help of an example. There are two sale types, A and B, where the tax rate and region specified are same. Thus, the report generated will club the sale/sales return for both sale type based on the same tax rate and region. This report contains details such as sale type, sales amount, tax amount, sales return amount, sales tax surcharge, nett sales and so on.

Purchase Tax Summary


Purchase Tax Summary Report contains details of all the purchase and purchase return transactions on which sales tax has been paid. It provides the summary on purchase and purchase return for a specific tax rate. All the purchase/purchase

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return belonging to a specific tax rate (5%, 10% and so on) and a specific region (Central/Local) will be grouped together irrespective of different sale types. Let us understand with the help of an example. There are two sale types, A and B, where the tax rate and region specified are same. Thus, the report generated will club the purchase/purchase return for both sale type based on the same tax rate and region. This report contains details such as sale type, purchase amount, tax amount, purchase return amount, sales tax surcharge, nett purchase and so on.

Sale Tax Account Register


Sale Tax Account Register contains details of all the transactions on which sales tax has been paid. It is the register generally required at the time of assessment. It contains each and every detail relevant to sales tax. You can generate the report for local and central transactions separately. It contains details such as date, bill number, party, bill amount, form and so on.

State-specific Sales Tax Register


Depending on the state selected in Configuration Menu, state-specific sales tax registers are listed in this option. For example, if the state selected is Delhi then the Sales Tax Registers are ST-2A and ST-2B. In VAT summaries ten options appear. Let us discuss these options in detail.

VAT Summary
This report is same as VAT Computation report explained below except that it shows the details of central sales and purchases that are not related to computation of VAT. This report forms the foundation/base for all other VAT reports.

VAT Computation
VAT Computation calculates the Net VAT Payable/Refundable for a specified period and shows all the computations used to derive at the final figure. It contains comprehensive detail such as input VAT, output VAT and so on.

Party-wise Sales/Purchase VAT Summary


This report displays the summary for sales/purchase transactions on which VAT has been paid or collected. This report classifies on the basis of the parties. It simply clubs all the sales/purchase transactions for different parties and displays the clubbed amount for different parties.

Item-wise Sales/Purchase VAT Summary


This report displays the summary for sales/purchase transactions on which VAT has been paid or collected. This report classifies on the basis of the items. It simply clubs all the sales/purchase transactions for different items and displays the balance amount for different items.

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Party-wise Sales/Purchase CST Summary
This report displays summary of sales/purchase transactions on which CST has been paid or collected. This report classifies on the basis of the parties. It simply clubs all the sales/purchase transactions for different parties and displays the clubbed amount for different parties.

Item-wise Sales/Purchase CST Summary


This report displays summary sales/purchase transactions on which Central Sales Tax is paid or collected. This report classifies on the basis of the items. It simply clubs all the sale/purchase transactions for different items and displays the balance amount for different items. In VAT Registers two options appear. Let us discuss these options in detail

Sales Registers
This register contains details of sales vouchers (VAT/non-VAT related) presented in the format prescribed by the state government. It allows you to display the report for local, central or both types of sales.

Purchase Register
This register contains details of purchase vouchers (VAT/non-VAT related) presented in the format prescribed by the state government. It allows you to display the report for local, central or both types of purchase.

State-specific VAT Register


Depending on the state selected in Configuration Menu, state-specific VAT registers are listed in this option. For example, if the state selected is Delhi then the VAT Registers are DVAT 16, DVAT 30, DVAT 31 and DVAT 35B.

Tax Paid Stock Details


Tax Paid Stock Details contains details of all the stock purchase transactions till a particular date on which sales tax has been paid. The relevance of this account is under VAT system. This registers helps you maintain a record of the tax paid stock purchase transactions, which in turn helps you, claim any refundable amount of tax from the government. It does not include central purchase transactions since you cannot claim a refund on central purchases. It contains details such as serial number, items, quantity, purchase date, invoice number and so on. You can generate this report for all items or group of items. After following these four steps you have successfully implemented Sales Tax Reporting in BUSY.

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