VAT REGISTRATION

FORMATION OF COMPANY IN INDIA - VAT REGISTRATION

What is Value Added Tax (VAT)?

VAT is a form of consumption tax that is indirect in nature, which means that it is collected by an intermediary, instead of being directly levied by the Govt. The difference between this and sales tax is that VAT is collected at multiple points. This is seen as a replacement to the tax structure currently existing.

Who is a person liable to pay tax?

Anybody buying or selling goods or products directly or indirectly, for his business or in connection to the business, irrespective of whether the payment is differed or is paid as salary or having any other consideration; this may include

  1. Brokers, commission or mercantile agents and other agents
  2. A non-resident dealer or any agent of his
  3. Auctioneers
  4. Societies such as co-operative society, associations or clubs
  5. A person indulging in casual trade
  6. A person involved in disposal of confiscated goods or goods that are unclaimed or goods that are scrap and other general unwanted goods.
  7. Banking and insurance companies who are involved in buying, selling or supplying goods
Transactions liable for tax under the DVAT Act – Sale [Section 2(1)(zc)]

The transactions which come under the term “sale” according to the DVAT Act are

  1. Goods transfer from one person to another.
  2. Goods transfer from one person to another.
  3. Goods transfer after they are hired or purchased.
  4. Goods supply by societies such as co-operative societies, clubs or associations to its members.
  5. Transfer of goods or property made in pursuit of any particular contract.
  6. Transactions involving any work contracts.
  7. Goods transfer as part of a specific lease.
  8. Certain goods such as food articles that are supplied in any form for human consumption. These could be food materials or clothes or any consumables.
  9. Disposal of unserviceable or useless goods, or goods that are confiscated form someone, surplus goods, or waste materials.
Compulsory Registration

Registration to this Act applies to every dealer if

Tax applicable for

S.No. Section Circumstances Taxable Quantum (Rs.)
1 16A(7) Casual trader as defined u/s 2(1)(g) NIL
2 18(2) Dealer who imports any goods for sale in Delhi NIL
3 18(2) Any other dealer 10,00,000.00

For dealers involved in work contract activities, the turnover before deducting the labor and service charges also referred to as gross turnover forms the tax quantum.

According to section 18(3) of the Act, the turnover from the following is not included in the tax quantum for the dealers:-

A) Sales of capital assets.
B) Sales made during the process of winding up of dealer’s activities.
C) Sales made as part of the permanent diminution of the dealer’s activities.