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VAT Journal
Usage in BUSY

VAT Reports
Broadly speaking, VAT reports can be classified in 2 categories: VAT Registers VAT Summary/Computation/Returns

VAT Registers
VAT Registers are list of Sales/Purchase vouchers presented in the format prescribed by the state government.

VAT Summary/Computation/Returns
VAT Computation calculates the Nett VAT payable/refundable for a specified period and shows all the computation used to derive the final figure. VAT Summary is almost same as VAT Computation except it also shows the details of Central Sales & Purchases, which is not connected with the calculation of VAT. VAT Return is basically VAT Summary only, printed in the format prescribed by the state government. So VAT Returns are different for different states, but all provides the same details.

Need for VAT Journal


BUSY tracks VAT related information (Input VAT/Output VAT) in Sales/Purchase/Sales Return/Purchase Return vouchers only. Since VAT Registers are based on Sales/Purchase/Sales Return/Purchase Return vouchers only, they can be printed easily. But other reports (VAT Computation/Summary/Returns) may have additional information. These reports are not complete without that additional information. Here VAT Journal comes into the picture. VAT Journal is a voucher that helps you enter the details of special transactions where VAT is affected. These details are not connected with Sales/Purchase/Sales Return/Purchase Return vouchers. Let us understand with the help of an example. If we have a debit note where VAT is calculated then in the VAT Summary Report this amount is not reflected. The reason is that the VAT Summary report takes into account only the sales/purchase and sales/purchase return transactions. For other transactions we have to enter the details separately. The details are entered with the help of VAT Journal. Once we have entered the special transactions in the VAT Journal then the VAT Summary report is automatically updated with these details.

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VAT Journal allows us to increase or decrease the Input Tax amount as well as the Output Tax amount. Input Tax amount represents the amount paid on our purchases while Output Tax amount represents the tax amount charged on our sales. The difference between Input Tax and Output Tax is Nett VAT payable/refundable. If Output Tax is more than Input Tax, then Nett VAT is payable otherwise Nett VAT is refundable.

Separation of VAT Journal and Accounting records


An important point to keep in mind is that the details entered in the VAT Journal have no bearing on the accounting records. Let us understand with the help of an example. We have entered the debit note details in the VAT Journal and the VAT Summary Report is updated with this information automatically. Now if we want to reflect this debit note in the accounting books then we have to enter the Debit note voucher separately. This is because the details that are entered in the VAT Journal are only for the purpose of VAT return. It has no relation or effect on the accounting aspect of the business. Given here is a screenshot of the VAT Journal voucher.

Special Cases for VAT Journal


Given here is a table of the special case scenarios where a VAT Journal voucher has to be entered.

Nature of

Effect (with examples)

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Adjustment Opening Balance brought forward Suppose in month of April Rs. 20,000 are claimable from the government but only Rs. 10,000 was claimed and refunded by the government. Now the balance Rs. 10,000 remains claimable in the month of April. The closing balance of the previous return period (previous month of April) does not get carried forward in the next return period (next month of May) automatically. It has to be entered manually in VAT Journal in order to reflect the value in VAT Returns & reports. In such a case, a VAT Journal voucher will be entered wherein the VAT amount to be claimed will be mentioned under head Opening Balance B/F in the Nature drop-down list. On account of Capital Purchases Machinery worth Rs. 50,000 @ 4% VAT has been purchased for business purpose. Now VAT Paid on capital purchase (machinery) can be claimed from the government. According to government, the VAT paid on capital purchase can be claimed in installments. In such a case a VAT Journal voucher will be entered wherein the VAT amount to be claimed will be mentioned under the head On A/c of Capital Purchases in the Nature drop-down list. Tax Claimed on old stock (Non-VAT compliant) Tax amounting to Rs. 15,000 has been paid in the previous years on purchases when VAT was not applicable. Now VAT can be claimed in such cases. In such cases a VAT Journal voucher will be entered wherein the VAT amount to be claimed will be mentioned under head Tax Claimed on Old Stock in the Nature drop-down list. A mobile dealer sold Nokia cell phones on 1/6/05 for Rs. 5,000 and charged VAT accordingly. He later realized that the actual price was Rs. 6,000. The extra amount of VAT on Rs. 1,000 is to be deposited with the government. There are 2 methods to reflect this in the VAT Return. One method is to modify the existing sale bill and reflect the change in VAT amount accordingly. Since modification of an existing voucher is not a good accounting practice, thus the dealer can opt for the second method. He can enter a debit note with the amount to be adjusted and enter a VAT Journal voucher for the same. In such a case a VAT Journal voucher will be entered wherein the VAT amount to be paid will be mentioned under head On A/c of change in price in the Nature drop-down list.

On account of change in price

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Change in Sale or Purchase nature ABC & Co. sold goods worth RS. 20,000 @4% VAT. After few days, the company realized that the rate of VAT on the goods was 12.5%. VAT to be deposited with the government is @ 12.5% rate. In such a case there can be 2 methods to reflect the change. One method is that the company modifies the sales invoice to reflect the change and collects the extra VAT amount from the buyer. Since modification of an existing voucher is not a good accounting practice, thus the company can opt for the second method. Moreover, the buyer can also refuse to pay the extra VAT amount. In such a case, VAT @ 8.5% becomes a liability for ABC & Co. The company can enter a VAT Journal voucher with the amount of VAT @ 8.5% to be paid under the head Change in Sale/Purchase nature in the Nature drop-down list. Debit note This case is similar to the on account of change in price. ABC & Co. sold goods worth Rs. 6,000 and charged VAT accordingly. The company later realized that the actual price was Rs. 8,000. VAT on Rs. 2,000 is to be paid to the government. Let us suppose that the company decides to collect Rs. 2000 plus VAT from the buyer party. Since modification of the existing sales invoice is not a good accounting practice the party will be debited through a Debit Note. To reflect the Debit Note in the VAT return, a VAT Journal voucher will be entered wherein the VAT amount to be paid will be mentioned under head Dr. Notes Received/Issued in the Nature drop-down list. Credit note This case is similar to the on account of change in price. ABC & Co. purchased goods worth Rs. 6,000 and paid VAT accordingly. The company later received a notification from the seller that the actual price was Rs. 8,000. VAT on Rs. 2,000 is to be paid to the seller. Let us suppose that the company decides to pay Rs. 2000 plus VAT to the seller party. Since modification of the existing purchase bill is not a good accounting practice the party will be credited through a Credit Note. To reflect the Credit Note in the VAT return, a VAT Journal voucher will be entered wherein the VAT amount to be claimed will be mentioned under head Cr. Notes Received/Issued in the Nature drop-down list. On account of stock transfer ABC & Co. purchases goods worth RS. 20,000 @ 12.5 % VAT. After few days, the company makes a stock transfer from its Delhi outlet to Gurgaon outlet. In case of stock transfer, the tax rate over and above 4% can be claimed from the government

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In such a case, the company will enter a VAT Journal voucher for the input tax amount to be claimed under the head On A/c of Stock Transfer in the Nature drop-down list. On account of exempt sale Book World is a book-publishing firm. The firm purchased paper @ Rs.100/kg and paid VAT @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. The purchase voucher is already included in the VAT Summary report thus we need to pass a VAT Journal voucher against the purchase voucher to cancel the claim. In such a case a VAT Journal voucher will be entered wherein the VAT amount to be adjusted against the purchase voucher for paper entered earlier will be mentioned under head On A/c of Exempt Sale in the Nature drop-down list. Sale and Purchase Cancellation ABC & Co. sold goods worth Rs. 10,000 plus VAT on 1/7/05. Next day the sale got cancelled and the goods were returned to ABC & Co. In such a case there can be 2 methods to reflect the cancellation. One method is to enter a sale return voucher for the cancellation of sale. Second method is to enter a VAT Journal voucher against the sale voucher entered earlier mentioning the amount of VAT to be adjusted under the head Sale/Purchase Cancellation in the Nature drop-down list. Goods damaged and destroyed Goods lying unsold with ABC & Co. worth Rs. 6,000 have been damaged. VAT has been paid on these goods at the time of their purchase. The goods cannot be sold and thus no VAT can be collected from the consumer. In such a case since VAT has been paid at the time of their purchase thus the company needs to pass a VAT Journal voucher against the purchase voucher to cancel the claim. In such a case a VAT Journal voucher will be entered wherein the VAT amount to be adjusted against the purchase voucher will be mentioned under head Goods Damaged /Destroyed in the Nature drop-down list. Penalties ABC & Co. provided misleading information to the government. On discovery of this discrepancy the government imposed a penalty on them. This penalty payment can be recorded as a VAT Journal voucher.

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In such a case a VAT Journal voucher will be entered wherein the penalty amount to be paid will be mentioned under head Penalties in the Nature drop-down list. Interest ABC & Co. delayed the payment of tax due to the government. Now the company has to pay interest on the delayed tax amount. This interest payment can be recorded as a VAT Journal voucher. In such a case a VAT Journal voucher will be entered wherein the interest amount to be paid will be mentioned under head Interest in the Nature drop-down list. On account of Bad Debts ABC & Co. sold goods for Rs. 6,000@ 4% VAT (VAT = 240) on credit to Ram. Now Ram is unable to pay the outstanding amount and thus Rs. 6,000 are declared as bad debts. In such a case, ABC & Co. will not pay output VAT to the government, since Ram did not pay the amount. In such a case a VAT Journal voucher will be entered wherein the VAT amount to be adjusted will be mentioned under head On A/c of Bad Debts/Recovery. Moving on, Ram has decided to pay Rs. 3000 (VAT = 120) to ABC & Co in the settlement of the debt. Thus ABC & Co. has to pay to the government the VAT collected. In such a case a VAT Journal voucher will be entered wherein the VAT amount to be paid will be mentioned under On A/c of Bad Debts/Recovery in the Nature drop-down list.

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Usage of VAT Journal in BUSY