THOK DAWAI
Pharamaceutical Wholesale Distribution System
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Value Added Tax (VAT)

This is a discussion to elaborate on the concept and theory of VAT. It some points that you must be aware of to avoid surprises and penalties. You are requested to contact your Sales Tax Consultant or the local Sales Tax Office for details and clarifications.

Pre and Post VAT differences

  Pre-VAT Post-VAT
1. Goods sold by the importer of goods into the state were considered taxable. Every item sold in the state is considered taxable.
2. Having a purchase bill from a registered dealer within the state was enough to claim the goods to be taxpaid. A bill from a dealer within the state certifies the extent of tax that has been credit on behalf of the subsequent seller.
3. It was not necessary to show the tax rate and tax amount in the sale bill. It is almost mandatory to show the tax rate and tax amount in the sale bill. The Input Tax Rebate of the subsequent seller depends on it.
4. Tax amount paid at the first point of sale was the revenue received by the government. Tax amount paid at the last point of sale (to the consumer) is the revenue collected by the government.

Value Added Tax (VAT) is one of the most cleverly crafted tax laws in India. It brings all the players of the supply chain under that taxman's purview excluding only the very small ones.

Checklist for Invoices

Proper purchase invoices / bills will be required to support your claim for the Input Tax Rebate. Ensure that all the Invoices / Bills bear the following minimum information...

  • Invoice/Bill should bear the title - TAX INVOICE
  • Bill Number and Date of Billing
  • Name and TIN of the Vendor
  • Name and TIN of the Buyer
  • Particulars of the Item
  • Value of the Item
  • Rate of Tax
  • Amount of Tax Collected

Discuss with your Consultant

You must consult your tax consultant on all aspects of this new tax. Some points for discussion are as follows...

  • What information and records will be required...
    • at the time of filling in the challans
    • at the time of filing returns
    • at the time of assessment.
  • What is the Taxable value of the goods?
  • What is the effect of any discount indicated on the bill on the tax amount calculated?
  • What if VAT Amount is not separately shown in your Purchase Invoice/Bill.
  • If you deal in drugs and medicines, enquire about the special terms that apply to the sale and purchase of these goods.
  • It is possible that there might a difference in the VAT% due and the VAT% collected.
    • What if the VAT amount recoverable is less than the actual VAT recovered?
    • What if the VAT amount recoverable is more than the actual VAT recovered?

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