VAT Accounting: Challenges & Solutions

VAT Accounting
Challenges & Solutions
Speaker
Designation
Tally Solutions (India) Pvt. Ltd.
01/12/22
© Tally Solutions FZ-LLC 1988-2006. All rights reserved .
Objective
To highlight
•The challenges in accounting

posed by changes in the taxation
framework
• The solutions offered by Tally
01/12/22
© Tally Solutions FZ-LLC 1988-2006. All rights reserved.
The VAT Impact
Businessman
Introduction of VAT
Government offers enormous Accountant
challenges to four
stakeholders
Software Provider
01/12/22
VAT - Implementation Challenge
The Challenge The Implication
The system needs to be

VAT legislation across all
configured to handle the
states is not uniform
differences in legislation
Continuation of CST CST compliance is

alongside with VAT at mandatory and also returns
least up to 2009. have to be filed
There are good reasons for CST to continue though
01/12/22
VAT - Accounting Challenge
Different states implement VAT differently
 Threshold for very small dealers – Rs. 5 to 10 Lacs not compulsory for
every state.
 Composition scheme which is not uniform
 Stage at which credit can be taken
 Capital goods credit
 Tax implications on opening stock
 Tax accounting of Closing stock and WIP
 Tax accounting for goods destroyed, rejects, samples
01/12/22
VAT – Implementation Challenge
Inter- State Industry Specific

Promotion Schemes Industry specific problems like
 Purchases
Input credit not available pharmaceuticals products and
on goods procured from  Input credit under sales perishable food products
outside the state promotion schemes – where shelf life is critical
bundled goods
 CST Paid is a cost
 Selling goods with the
same tax rate
 Selling goods with
different tax rate
Partial input
credits
Capital Goods Issues relating to VAT where
Leasing Industry input credit is partially
available.e.g. in the case of
Amortisation of VAT on capital VATable and non-VATable
goods inputs
01/12/22
A typical transaction cycle under Sales Tax
Company
P Q
Surat Jaipur R S
Jaipur Jaipur
Sale @100
1st local Sale 2nd local Sale
CST 4% @ 137.68
@ 114
Sale to local
LST 12% TOT 1.5%
Consumer
@ 149.74
A margin of Rs.10.00 is retained by each dealer
TOT 1.5%
01/12/22
A typical VAT transaction cycle
Company
P Q
Surat Jaipur R S
Jaipur Jaipur
Sale @100
1st local Sale 2nd local Sale
CST 4%
@ 114 @ 124 Sale to local
VAT 12.5% VAT 12.5% Consumer
@ 134
Retaining the same margin through the sales cycle VAT 12.5%
01/12/22
A typical Sales Tax transaction cycle
Seller Buyer Selling Tax Rate Tax Total

Price Amount
P Q 100 4% CST 4.00 104.00
Q R 114 12% LST 13.68 127.68
R S 137.68 1.5% TOT 2.06 139.74
S Consumer 149.74 1.5% TOT 2.25 151.99
Total 21.99
01/12/22
A typical VAT transaction cycle
Seller Buyer Selling Tax Rate Invoice Tax Tax Net Tax
Price Value inc payable credit Outflow
Ex Tax tax
P Q 100 4% CST 104 4 0 4.00
Q R 114 12.5% 128.25 14.25 0 14.25

VAT
R S 124 12.5% 139.50 15.50 14.25 1.25

VAT
S Consumer 134 12.5% 150.75 16.75 15.50 1.25

VAT
Total 20.75
01/12/22
VAT Documents
Tax Invoice
Debit/Credit Note
At the minimum
 Tax Invoice for taxable goods
 Bill of Sale in certain cases
E.g. for only non-taxable goods
 In duplicate, Original-to be delivered to the
buyer
 Credit and Debit Notes
01/12/22
Net Difference Between Sales Tax and VAT
Tax Payable under Sales Tax Act with TOT 21.99
Tax Payable under VAT 20.75
Net Difference ST – VAT 1.24
Net Variation –benefit 5.63% on LST
01/12/22
VAT Records
 Stock Records
 Details of Sales and purchases of each Stock Item
 Manufacturing Account
 VAT Account in specified format
Records must contain stipulated information
01/12/22
Advantage Tally
Tally has VAT experience!

Printing Invoice
It already serves the VAT needs
according to the
of its UK customers as well as customer of
different sate
25 states in India
requirements
Handling MRP based tax accounting and

Discounts of different types
01/12/22
Example: VAT configuration
01/12/22
Example: Creating Purchase Ledger
01/12/22
Example: Creating Sales Ledger
01/12/22
Example: Customer Ledger Creation
01/12/22
Supplier Ledger Creation
01/12/22
Input VAT Ledger Creation
01/12/22
Output VAT Ledger Creation
01/12/22
CST on Purchase Ledger Creation
01/12/22
CST on Sales Ledger Creation
01/12/22
Creating Stock Item
01/12/22
Purchase Voucher Creation
01/12/22
Capital Goods Purchased
01/12/22
Creation of Purchase-Exempt Voucher
01/12/22
Creation of Inter-State Purchase Voucher
01/12/22
Creation of Sales Voucher
01/12/22
Creation of Consignment/Branch Transfer Voucher
01/12/22
Creation of Inter-State Sales Voucher
01/12/22
Creating Voucher class for VAT adjustment
01/12/22
Creating VAT adjustment entries
01/12/22
Adjustment Towards CST
01/12/22
TDS adjustment
01/12/22
Adjustment for Advance Tax Paid
01/12/22
Adjustment for Purchase Tax
01/12/22
VAT computation and Return
01/12/22
VAT Computation Report
01/12/22
VAT Return
01/12/22
Forms and Reports
All statutory VAT reports will be directly generated

from Tally
All returns will be generated for printing and/or

electronic filing
Tally 7.2
The Value Added TALLY for
VALUE ADDED TAX
01/12/22
Tally is committed
To ease the pain of
complexity of compliance
With Power of Simplicity
THANK YOU!
For more information on VAT log on to

http://www.tallysolutions.com/vat/whatsnew.shtml
01/12/22

VAT Accounting: Challenges & Solutions

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VAT Accounting: Challenges & Solutions

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VAT Accounting

Challenges & Solutions

•The challenges in accounting

• The solutions offered by Tally

The Challenge The Implication

The system needs to be

Continuation of CST CST compliance is

There are good reasons for CST to continue though

Different states implement VAT differently

Inter- State Industry Specific

Seller Buyer Selling Tax Rate Tax Total

P Q 100 4% CST 4.00 104.00

Q R 114 12% LST 13.68 127.68

R S 137.68 1.5% TOT 2.06 139.74

S Consumer 149.74 1.5% TOT 2.25 151.99

P Q 100 4% CST 104 4 0 4.00

Q R 114 12.5% 128.25 14.25 0 14.25

R S 124 12.5% 139.50 15.50 14.25 1.25

S Consumer 134 12.5% 150.75 16.75 15.50 1.25

Tax Payable under Sales Tax Act with TOT 21.99

Tax Payable under VAT 20.75

Net Difference ST – VAT 1.24

Net Variation –benefit 5.63% on LST

Records must contain stipulated information

Tally has VAT experience!

Handling MRP based tax accounting and

All statutory VAT reports will be directly generated

All returns will be generated for printing and/or

With Power of Simplicity

For more information on VAT log on to

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