VAT & CST

REGISTRATION

VAT & CST REGISTRATION VALUE ADDED TAX (VAT) AND CENTRAL SALES TAX (CST)

India does not have a classic Value Added Tax (VAT) structure. Instead, a separate tax on the sale of goods and on the rendering of services is imposed under different legislations. Sale and purchase of goods are subjected to charge sales tax. Sales tax is levied under Central and State Sales Tax Legislations depending upon the movement of goods in pursuance of a sale transaction. If the transaction involves movement of goods from one state to another (inter-state), the tax is levied under Central Sales Tax Act (CSTA), 1956.

This Act also covers transactions of import of goods into or export of goods out of India. Sales tax is not imposed on import of goods into the country or export of goods out of the country. The Central Sales Tax (CST) Act is administered by the state governments and the tax is levied at the origination of transaction (origin based levy). The revenue collected under Central Sales Tax Act is retained by the state governments. The rates of tax under Central Sales Tax Act vary from state to state and product to product. The standard rate of CST is 4 per cent or the lower rate applicable in the state of the seller if the purchaser is purchasing the same for resale or for use in the manufacture of goods for sale or for specified purposes and both the seller and buyer are registered dealers. Otherwise, the rate is higher of 10 per cent or the rate applicable in the state of sale.

The transactions of sales or purchases involving the movement of goods within a state (intra-state) are governed by respective State Sales Tax Acts. States also levy the tax on transactions which are "deemed sales" like works contracts and leases. A works contract essentially is a contract for carrying out work involving the supply of labor and material where the property in the materials passes during the course of execution of the contract. Lease is a transaction involving transfer of right to use goods


VAT AUDIT
VAT legislation requires a VAT audit certificate/report issued by a chartered accountant in a prescribed format. The format for each state is different but generally, has the same requirements. The due date for signing the VAT audit report/certificate varies from state to state and ranges between the months of September and December. Generally, VAT audit is applicable to all dealers who are liable to pay VAT provided their turnover of either sale or purchase exceeds a specified limit. Further, VAT audit is also mandatory for specified categories of dealers, as prescribed by state legislation. Documents required at the time of registration vary from State to State. Normally, the following are asked for: