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Insight into Karnataka VAT

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Insight into VAT Contents

Overview of taxes
VAT Insights Special transactions GST Impact on sale of goods Opportunities

2012 Accolet Advisors Private Limited. All rights reserved.

Insight into VAT Overview of indirect taxes

State duties

Entry Tax/ Octroi

Service Tax

INDIRECT TAXES

VAT/ CST

Customs Duty

Excise Duty

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Insight into VAT Revenue from central taxes

4,00,000 3,50,000 3,00,000 2,50,000 2,00,000 1,50,000 1,00,000 50,000 -

Total: 932,440 Crores

Excise Corporate tax

Corporation Tax 3,59,990 Taxes on Income 1,72,026 Other Taxes and Duties 635 Taxes of Union Territories Customs 1,51,700 Union Excise Duties 1,64,116 Service Tax 82,000

Tax (INR)

Income 1,973 tax

Indirect Tax Revenues Customs Union Excise Duties Service Tax Total indirect tax revenue Source: Finance Bill 2011-12

Rs. Crore 151,700 164,116 82,000 397,816

Other Tax Revenues Taxes of Union Territories/ Others Income tax Corporation tax Total direct & other duties

Rs. Crore 2,608 172,026 359,990 534,624

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Insight into VAT States Revenue (All India) (Rs. in Crores)

Sl. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 to 28

State Maharashtra Andhra Pradesh Uttar Pradesh Tamil Nadu Karnataka Gujarat Kerala West Bengal Rajasthan Madhya Pradesh Haryana Punjab Bihar Orissa Chhattisgarh Jharkhand Goa Other States Total

2009-10 (RE) 55,711 40,664 35,255 35,396 29,339 26,353 17,403 16,917 16,663 17,442 14,045 13,857 8,141 8,920 6,692 5,560 1,906 15263 3,65,527
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2010-11 (BE) 63,838 46,999 42,306 41,438 36,228 30,261 20,884 20,008 19,021 18,670 16,469 16,308 10,644 10,360 7,505 5,967 2,218 17558 4,26,682

% 15% 11% 10% 10% 8% 7% 5% 5% 4% 4% 4% 4% 2% 2% 2% 1% 1% 4%

Insight into VAT Revenue Mix State Revenue (Rs. in Crores)

Year
VAT

2009-10 (RE)
225227

2010-11 (BE)
264848

%
62% 13% 12% 5%

State Excise Tax on Property Tax on Vehicles

Electricity Duties Taxes on Passengers & Goods Profession Tax Other taxes and duties Entertainment tax Total

47,729 44,459 18,758

12,908 9,281 3,605 2,648 912 3,65,527

55,478 52,746 21,561

13,524 10,641 3,895 2,790 1,199 4,26,682

3% 2% 1%
1% 0%

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Insight into VAT Revenue Mix Karnataka State (Rs. in Crores)

Year
VAT

2010-11 (BE)
19,376 784

%
53% 2%

CST
State Excise Tax on Property Tax on Vehicles Electricity Duties Taxes on Passengers & Goods

7,425
3,643 2,050 1,360 530 508

20%
10% 6% 4% 1% 1%

Profession Tax
Other taxes and duties Entertainment tax Total

110
442 36,228

0%
1%

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Insight into VAT Revenue Comparison (Rs. in Crores)

3,50,000 3,00,000 2,50,000 2,00,000 1,50,000 1,00,000 50,000 2,64,848

All States Revenue

2,00,466 55,478

2,85,891

52,746

21,561 Tax on Vehicles

13,524 Electricity Duty

18,525 Others Central Share Non-tax revenue

VAT/ CST State Excise Property Tax 25,000

20,000
15,000 10,000 5,000 -

20,160

Karnataka States Revenue

9,060 7,425 8,350

3,643

2,050

1,360

1,590 Others Central Share Non-tax revenue

VAT/ CST State Excise Property Tax

Tax on Vehicles

Electricity Duty

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Insight into VAT Basics of VAT

VAT replaced the erstwhile single-point sales tax system Most States implemented VAT w.e.f. 01-Apr-05, while all States came under VAT w.e.f. 01-Jan-08 The rate of VAT depends on the product sold, ordinarily:
VAT Merit: Concessional: Precious metals: Demerit rate: 14% 5% 1% 20% With Form C: Without Form C: CST 2% Local VAT Rate

Different States have changed the effective rate of tax

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Insight into VAT VAT Implementation Date

Sl. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

State Haryana Andhra Pradesh Arunachal Pradesh Bihar Daman & Diu Dadra & Nagar Haveli Delhi Goa Himachal Pradesh Jammu & Kashmir Karnataka Kerala Maharashtra Mizoram Nagaland Orissa Punjab

Implementation date 01-Apr-03 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05 01-Apr-05

Sl. 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33

State Sikkim Tripura West Bengal Assam Meghayala Manipur Uttaranchal Chandigarh Chhattisgarh Gujarat Jharkhand Madhya Pradesh Rajasthan Tamil Nadu Pondicherry Uttar Pradesh

Implementation date 01-Apr-05 01-Apr-05 01-Apr-05 01-May-05 01-May-05 01-Jul-05 01-Oct-05 15-Dec-05 01-Apr-06 01-Apr-06 01-Apr-06 01-Apr-06 01-Apr-06 01-Jan-07 01-Apr-07 01-Jan-08

2012 Accolet Advisors Private Limited. All rights reserved.

Insight into VAT Basics of VAT

VAT replaced the erstwhile single-point sales tax system Most States implemented VAT w.e.f. 01-Apr-05, while all States came under VAT w.e.f. 01-Jan-08 The rate of VAT depends on the product sold, ordinarily:
VAT Merit: Concessional: Precious metals: Demerit rate: 14% 5% 1% 20% With Form C: Without Form C: CST 2% Local VAT Rate

Different States have changed the effective rate of tax

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Insight into VAT VAT Rates

Sl. 1 State Gujarat Implementation date Additional tax of 2.5% on goods taxed at 12.50% and on certain specified goods Additional tax of 1% on goods taxed at 4% other than declared goods Social security cess of 1% other than on declared goods Additional tax of 1% on goods taxed at 12.50% Additional tax of 0.5% on goods taxed at 4% other than declared goods VAT rate increased to 14% on goods taxed at 12.5% VAT rate increased to 5% on goods taxed at 4% Effective rate 15% 5% 13.5%/ 5% 13.5% 4.5% 14% 5% 5% 13.5% 5% 14% 14.5% 5% 5% 13.75%/5.5% 5% 14% 5% 14.5%
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2
3 4 5 6

Kerala Uttar Pradesh Rajasthan Madhya Pradesh

Assam

7
8 9 10 11 12

VAT rate increased to 5% on goods taxed at 4% VAT rate increased to 13.5% on goods taxed at 12.5% VAT rate increased to 5% on goods taxed at 4% Chattisgarh VAT rate increased to 14% on goods taxed at 12.5% Andhra VAT rate increased to 14.5% on goods taxed at 12.5% Delhi VAT rate increased to 5% on goods taxed at 4% VAT rate increased to 5% on goods taxed at 4% Punjab Surcharge/ additional tax of 10% on all goods VAT rate increased to 5% on goods taxed at 4% Karnataka VAT rate increased to 13.5% on goods taxed at 12.5% VAT rate increased to 5% on goods taxed at 4% Tamil Nadu VAT rate increased to 14.5% on goods taxed at 12.5%
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Insight into VAT Charge of VAT

VAT/ CST payable on sale of goods

Transfer of property in goods for consideration

Sale includes

Transfer of property in execution of works contracts

Transfer of right to use goods

Goods movement within a state Sale may results in Goods movement between states Goods movement outside country

VAT applicable CST applicable Export: exempt

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Insight into VAT Sale Types Sale simplicitor Works Contract Right to use

Transfer of property in goods From one person to another For consideration in cash, deferred payment and other valuable consideration

Barter or exchange is not sale

Rate of tax based on schedule of goods

1st Schedule: Exempt

2nd Schedule: 1% 3rd Schedule: 5% 4th Schedule: 20% 6th Schedule: Rate for WCT
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Insight into VAT Sale Types Sale simplicitor Works Contract Right to use

Refers to contracts involving supply of goods and services under a composite contract

VAT payable at the rate specified for works contracts, differs from State to State.
Deduction for labour charges based on: Actual labour, if can be determined Standard abatement: Different for different States and for type of works contract

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Insight into VAT Sale Types Sale simplicitor Works Contract Right to use

Refers to transactions involving transfer of the right to use goods, were both control and possession is transferred VAT ordinarily payable on the value received for transfer and on the rate applicable as if sold.

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Insight into VAT General conditions

VAT/ CST is payable on total amount charged for sale of the goods (extended meaning), subject to deductions for labour, discount, tax, etc.

For sales return, deduction available only if made within 6 months and for discounts only when given on invoice
VAT payable on sale of scrap, assets and other goods Purchases from unregistered dealer are subject to tax Delivery challan/ tax invoice necessary for movement of goods CST sale to SEZ units are exempt against declaration in Form I Credit is available for VAT paid on local purchases of eligible inputs, specified goods are restricted for credits

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Insight into VAT Compliance Calendar

Compliance VAT returns

Periodicity and Due Date Monthly, on or before 20th of the following month

Formats Prescribed Form VAT 100

Comments Returns can be revised within 6 months in Form VAT 100 Interest at the rate of 1.50% per month in case of delay Only if the Total turnover of the dealer crosses INR 100 Lakhs Certificate in Form 158 to be issued to the canteen Penalty of Rs. 50 per day of default

Payment of VAT Along with or before return Audit of accounts Annually, on or before 31st December

Form VAT 152 Form VAT 240

Deduction from Along with return canteen payment Updation of registration details Amendment in registration Along with return for the month of March Case to case basis

Form VAT 126 Form VAT 6

Form VAT 2, 3, 5 Any change in registration is to be intimated within 30 days

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Insight into VAT High Seas Sale

Documentation
Outside India

1.
India 1 Movement of goods from Seller 1 to Buyer 2 thru Buyer 1

Seller 1 would raise the sale invoice on Buyer 1. Before the filing of bill of entry, Buyer 1 would sell the goods on high seas to Buyer 2. An high seas sale agreement is entered into between Seller 2 and Buyer 1 The bill of entry is filed by Buyer 2 and goods are cleared by it on payment of applicable customs duty. The assessable value declared by Buyer 2 would be price charged by Seller 2 The number of resellers may be more than 1 and the chain can continue.

2.

Buyer 2

Seller 1

3.

4.
1 Buyer 1 Seller 2 2

Invoice from Seller 2 to Buyer 1

5.

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Insight into VAT Intransit Sale (E-1 Sale)

Documentation
Outside Karnataka

1.
1
Movement of goods from Supplier to PQR

PQR

Supplier (XYZ) would raise the invoice on ABC India as bill to ABC India and ship to PQR. Supplier will charge applicable CST against Form C and issue Form E-1. ABC India will raise its commercial invoice on PQR, claiming exemption on subsequent in-transit sale. ABC India will collect Form C from PQR. The chain of sale can continue.

Supplier XYZ

2.
Invoice from ABC India on PQR
2

ABC India 1 Invoice from supplier on ABC India

3.

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Insight into VAT GST Impact on imports

Pre GST Basic Customs Duty Countervailing Duty

Post GST Basic Customs Duty

10%

10%

10.30%

CGST

8%

Customs Education Cess Additional Duty of Customs Total Customs Duty

3%

Customs Education Cess

Nil

4%

SGST

8%
Cascading effect continues?

26.85%

Total Customs Duty

27.60%

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Insight into VAT GST Impact on purchase of goods

Pre GST State 1 State 2 State 1

Post GST State 2

Interstate Purchase (Excise 10.30%) (CST 2% / 5% / 14%)

Vendor

Interstate Purchase (IGST 16%)

Vendor

Full credit of IGST No credit for CST

Unit Local Purchase (Excise 10.30%) (VAT 5% /14%) Vendor

No excise duty in case of purchased from dealer. Restriction on excise duty credits

Unit

Local Purchase (CGST 8%) (SGST 8%) Vendor

Full credit of SGST & CGST

Input credit only if related to business and for dealer in goods

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Insight into VAT GST Impact on supply of services

Pre GST
State 1 State 2 State 1

Post GST
State 2

Interstate (Service tax 10.30%)

Vendor

Interstate

(IGST 16%)

Vendor

Full credit of IGST Unit Local (Service Tax 10.30%) Vendor

Credit of service tax available

Unit Local (CGST 8%) (SGST 8%) Vendor Full credit of SGST & CGST

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Insight into VAT GST Impact on stock transfer

Pre GST State 1

Post GST

State 2

State 1 Stock Transfer

State 2

Unit

Stock Transfer (No Tax)

Unit

Unit

(IGST 16%)

Unit

Export (No tax) Case for refund

Export (No tax)

Customer

Customer

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Insight into VAT Opportunities

Advisory Compliance VAT Audit Litigation

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Accolet Advisors Private Limited

Accounting | Consulting | Legal | Tax

Deepak Kumar Jain B

H/P: +91 98809 23240 Email: [email protected]

Green Apple, No. 16, 1st Floor, Murphy Road, Ulsoor, Bangalore 560 008, India. Phone: +91 80 2556 2557 www.accoletadvisors.com

2012 Accolet Advisors Private Limited. All rights reserved.

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