`
Flash on Introduction of
VAT in Uttar Pradesh
Export of Services
Background
The Governor of Uttar Pradesh has promulgated
the Uttar Pradesh Value Added Tax Ordinance,
2007 to provide for the introduction of the value
added system of taxation in the State of Uttar
Pradesh from such date as may be notified by
the State Government. The notification for
introduction of VAT from January 1, 2008, is
expected to be issued shortly.
The highlights of the Ordinance are as
follows :-
Coverage
The Uttar Pradesh Value Added Tax Ordinance
2007, as amended till date, will replace The
Uttar Pradesh Trade Tax Act, 1948 (U.P. Act
No. XV of 1948) to replace the sales tax with
VAT. Turnover tax and State development tax
as applicable under the U.P. Trade Tax Act will
be subsumed in the VAT. Entry Taxes
applicable to specified commodities would,
however, continue to be in force.
Registration for existing dealers
• All existing registered dealers will be
automatically registered for VAT and
granted Tax Payer Identification Numbers
(TIN).
• Such dealers will be required to present their
registration certificates within sixty days of
the commencement of the Ordinance, for
necessary endorsements by the assessing
authorities.
Threshold limits/registration requirements
• No registration is necessary for dealers with
turnover upto Rs.5 lakhs.
• Registration is compulsory for:
- dealers already registered under the
U.P. Trade Tax Act and the Central
Sales tax Act (CSTA)
- dealers holding opening stock of any
imported taxable goods, goods which
have been manufactured by use of any
imported taxable goods & goods which
have been manufactured by use of any
goods purchased on the strength of
declaration forms/certificates
December 24, 2007
- dealers having turnover in excess of Rs. 5
lakhs
- dealers executing inter-State sales /
purchases of taxable goods, exports
outside India and consigning taxable
goods outside the State
- dealers importing any goods into the State
of U.P.
- transporters, carriers, forwarding agents,
railway container contractors or owners,
persons in-charge of a godown or cold
storage or warehouse transporting/storing
any taxable goods and not in a position to
provide details of the consignor/consignee
or owner of such goods respectively.
Composition Scheme
Intra-State dealers with turnover exceeding Rs. 5
lakhs but not exceeding Rs. 50 lakhs will be eligible
to opt for composition scheme for payment of VAT
@ 1% on the turnover.
Rates
Goods exempt from VAT
An illustrative list of the goods exempt from the
payment of VAT is as under:
• Books and periodicals & journals including
Braille books, maps, charts & globe
• Salt (branded or otherwise), kala namak,
sendha namak
• Items covered by PDS (except Kerosene)
• Handloom cloth of all kinds, handloom durries,
handloom shawls whether plain, printed, dyed or
embroidered.
• Handicrafts including wooden handicrafts but
excluding wooden furniture
• All seeds other than oilseeds
• Fresh vegetables and fresh fruits including
potato, onion, garlic and ginger
Goods chargeable at 4%
An illustrative list of the goods chargeable to VAT at
4% is as under:
• Specified IT products
• Specified Industrial Inputs
Page No. 1
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Flash on Introduction of December 24, 2007
VAT in Uttar Pradesh
Export of Services
• Drugs & Medicines • Purchased goods should be used in the
• Machinery, equipment, apparatus, tools, manufacture of goods (except non-VAT goods)
moulds, dies and component spare parts, where such manufactured goods will be sold in
accessories thereof the course of export outside India
• Goods specified u/s 14 of the CSTA • Goods should find place in the Schedules (other
(declared goods). than non-VAT goods) and should be supported
• Tractors, Threshers, Harvesters & by original tax invoices
attachments & parts thereof • ITC may be offset against the VAT payable for
• Used motor vehicles the tax period. The balance of the ITC can be
used to offset taxes payable under the CSTA
Goods outside VAT during the tax period. Unutilized balances can
be carried forward to the subsequent tax periods
An illustrative list of the goods chargeable to without any restrictions
VAT at different rates and at single point (either • In case of stock transfers, ITC shall be restricted
in the manufacturer’s or the importer’s hands) is to tax paid in excess of the rate as prescribed
as under: u/s 8(1) of the CSTA

Name and Point Rate of General Exclusions

description of of Tax Tax%
goods ITC will not be available on the following:
Petrol M or I 26%
Diesel Oil as M or I 21% • Goods purchased for the benefit of proprietor,
defined in the partner etc
United Provinces • Goods procured as free samples, gifts for
Sales of Motor personal use, stolen goods and goods damaged
Spirit, Diesel Oil in transit
and Alcohol • Goods destroyed at the intermediary stage in
Taxation Act, 1939 the process of manufacture
Aviation turbine fuel M or I 20% • Goods returned to selling dealer within a period
(Duty paid) or of six months from the date of purchase
aviation turbine fuel • Goods used in packing of any exempt goods
(bonded). where such exempt goods are not sold in the
Natural gas M or I 20% course of export of the goods outside of the
territory of India
Goods chargeable to 12.5%
Transitional Stocks
• All goods except those mentioned under any
schedule appended to the Ordinance shall • ITC will be available in respect of opening
be chargeable to VAT @ 12.5% stocks of goods (including semi-finished goods
and excluding non-VAT goods, capital goods
Input Tax Credit (ITC) and captive power plant) that have been
purchased within a period of six months ending
General Conditions on the date of commencement of the Ordinance
• The claim will be required to be filed within a
• Both buyer and seller should be registered period of 30 days from the date of
dealers and should not be under the commencement of the Ordinance
composition scheme • Such ITC will be allowable in six monthly /
• Purchase of goods should be in the course quarterly equal installments after the expiry of
of business for resale or for use in the four months from the date of commencement of
manufacture of taxable goods (except non- the Ordinance
VAT goods)

Page No. 2
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Flash on Introduction of
VAT in Uttar Pradesh
Export of Services
Provisions relating to Capital goods
• ITC will be available on specified capital
goods that are purchased after the
commencement of the Ordinance or the
registration of the dealer, whichever is later
• ITC will be allowable in three successive
annual installments of equal amounts
• No ITC will be available on automobiles,
capital goods used in the execution of works
contracts and air-conditioning units,
refrigerators, air coolers, etc if not connected
with the manufacturing process
Tax Invoices
• Tax invoices would be required to enable
the buyer to avail credits of the input taxes.
Tax invoices will be required to be prepared
in triplicate. In terms of the draft VAT rules,
tax invoices should contain the following
particulars:
- consecutive serial number
- date
- name, complete address and TIN of the
selling dealer
- name and address of its branch or depot
from where goods are sold
- tax invoice book number
- name, address and TIN of the purchaser
- description of goods
- quantity or measure of goods
- value of goods
- other charges, if any
- amount of discount, if any
- rate of tax, amount of tax charged
- signature of the person authenticating tax
invoice
Maintenance of Accounts
• Every registered dealer will be required to
maintain the prescribed books of accounts.
An illustrative list of such accounts is as
under:
- Purchase Account
- Sales / Stock Transfer Account
- Production cum Stock Account
- Records of ITC on inputs
- Records of ITC on capital goods etc
December 24, 2007
• Every dealer maintaining books, accounts or
documents electronically, shall also be required
to take day to day print outs of all such books,
accounts and documents
• All books of accounts and documents will be
required to be preserved for a period of eight
years after the expiry of the relevant
assessment year
Filing of Return
E very registered dealer will be required to file VAT
returns within the prescribed time period. The
periodicity for filing VAT returns is as under:
Regular Returns
• Quarterly returns for registered dealers with
turnover less than Rs. 1 crore
• Monthly returns for registered dealers with
turnover exceeding Rs. 1 crore
• Annual return for all registered dealers
irrespective of turnover
Revised Return
• For errors and omissions: before filing the next
return
• For s ales returns (received within six months) :
within 30 days from the end of the month
Audit
• A compulsory VAT audit has been prescribed for
registered dealers whose turnover exceeds Rs.
1 crore
• Audit will be required to be completed within a
period of six months from end of the relevant
assessment year
Miscellaneous
• Provisional refunds have been prescribed for the
exporters
• Every non registered dealer responsible for
making tax deduction at source will be required
to obtain a tax deduction account number
• All exemption schemes under the erstwhile Act
will be converted to tax deferment schemes
Page No. 3
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Flash on Introduction of December 24, 2007
VAT in Uttar Pradesh
Export of Services
Queries on the flash may be addressed to the following:

S. Madhavan
PricewaterhouseCoopers
Sucheta Bhawan, 1st Floor
11-A Vishnu Digamber Marg,
New Delhi –110 002, India
Ph: +91(11) 23210890-99/ 41150000
Fax: +91(11) 23210594 /23210596
Email – s.madhavan@in.pwc.com

Sachin Menon/ Prasad Paranjape/ Santosh Dalvi

PricewaterhouseCoopers
252, Veer Savarkar Marg, 3rd Floor
Shivaji Park, Dadar
Mumbai- 400 028, India
Ph: +91(22) 6669 1500
Fax: +91(22) 6654 7804 /6654 7805
Email – sachin.menon @in.pwc.com
prasad.paranjape@in.pwc.com
santosh.dalvi@in.pwc.com

Somnath Ballav
PricewaterhouseCoopers
Plot No. Y 14, Block EP
Sector V, Salt Lake Electronics Complex
Bidhan Nagar
Kolkata – 700 091, India
Ph: +91(33) 2357 9100/ 3384 - 3390
Fax: +91(33) 2357 3394/ 3395
Email – somnath.ballav@in.pwc.com

Page No. 4