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Speaker Designation Tally Solutions (India) Pvt. Ltd.

VAT Accounting

Challenges & Solutions

Objective

To highlight •The challenges in accounting posed by changes in the taxation framework • The solutions offered by Tally

The VAT Impact Government Businessman Introduction of VAT offers enormous challenges to four stakeholders Software Provider Accountant 4/27/2020 © 2006 Tally Solutions (India) Pvt. Ltd. All rights reserved.

VAT - Implementation Challenge The Challenge The Implication VAT legislation across all states is not uniform Continuation of CST alongside with VAT at least up to 2009.

The system needs to be configured to handle the differences in legislation CST compliance mandatory and returns have to be filed is also There are good reasons for CST to continue though 4/27/2020 © 2006 Tally Solutions (India) Pvt. Ltd. All rights reserved.

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 4/27/2020 © 2006 Tally Solutions (India) Pvt. Ltd. All rights reserved.

VAT

–

Implementation Challenge  Inter- State  Input Purchases available the state credit on not goods procured from outside CST Paid is a cost Capital Goods Leasing Industry Amortisation of VAT on capital goods Promotion Schemes  Input credit under sales promotion schemes – bundled goods  Selling goods with the same tax rate  Selling goods different tax rate with Industry Specific Industry specific problems like pharmaceuticals products and perishable food products where shelf life is critical Partial input credits Issues relating to VAT where input inputs credit is partially available.e.g. in the case of VATable and non-VATable 4/27/2020 © 2006 Tally Solutions (India) Pvt. Ltd. All rights reserved.

A typical transaction cycle under Sales Tax Company P Surat Q Jaipur R Jaipur S Jaipur Sale @100 CST 4% 1 st local Sale @ 114 LST 12% A margin of Rs.10.00 is retained by each dealer 2nd local Sale @ 137.68

TOT 1.5%

Sale to local Consumer

@ 149.74

A typical VAT transaction cycle Company P Surat Q Jaipur R Jaipur S Jaipur Sale @100 CST 4% 1 st local Sale @ 114 VAT 12.5% 2nd local Sale @ 124

Sale to local

VAT 12.5%

Consumer

A typical Sales Tax transaction cycle

Seller P Q R S Total Buyer Q R S Consumer Selling Price 100 Tax Rate 4% CST Tax Amount 4.00

114 12% LST 13.68

137.68

149.74

1.5% TOT 1.5% TOT 2.06

2.25

21.99

Total 104.00

127.68

139.74

151.99

A typical VAT transaction cycle

P Q R S Total Seller Buyer Q R S Consumer Selling Price Ex Tax 100 Tax Rate Invoice Value inc tax Tax payable Tax credit Net Tax Outflow 4% CST 104 4 0 4.00

114 14.25

0 14.25

124 134 12.5% VAT 12.5% VAT 12.5% VAT 128.25

139.50

150.75

15.50

16.75

14.25

15.50

1.25

20.75

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 4/27/2020 © 2006 Tally Solutions (India) Pvt. Ltd. All rights reserved.

Net Difference Between Sales Tax and VAT

Tax Payable under Sales Tax Act with TOT Tax Payable under VAT Net Difference ST – VAT Net Variation –benefit

21.99 20.75

1.24

5.63% on LST

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 4/27/2020 © 2006 Tally Solutions (India) Pvt. Ltd. All rights reserved.

Advantage Tally

Tally has VAT experience!

It already serves the VAT needs of its UK customers as well as customer of 25 states in India Handling MRP based tax accounting and Discounts of different types Printing Invoice according to the different sate requirements 4/27/2020 © 2006 Tally Solutions (India) Pvt. Ltd. All rights reserved.

Supplier Ledger Creation

Input VAT Ledger Creation

Output VAT Ledger Creation

CST on Purchase Ledger Creation

CST on Sales Ledger Creation

Creating Stock Item

Purchase Voucher Creation

Capital Goods Purchased

Creation of Purchase-Exempt Voucher

Creation of Inter-State Purchase Voucher

Creation of Sales Voucher

Creation of Consignment/Branch Transfer Voucher

Creation of Inter-State Sales Voucher

Creating Voucher class for VAT adjustment

Creating VAT adjustment entries

Adjustment Towards CST

TDS adjustment

Adjustment for Advance Tax Paid

Adjustment for Purchase Tax

VAT computation and Return

VAT Computation Report

VAT Return

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

Tally is committed To ease the pain of complexity of compliance With Power of Simplicity THANK YOU!

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VAT Accounting

Different states implement VAT differently

All statutory VAT reports will be directly generated from Tally All returns will be generated for printing and/or electronic filing

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