Value Added Tax Registration

For enterprises making a turnover of over Rs 5 lakh by selling goods and services, registration for VAT is mandatory in the respective state of operation. To start pay VAT, one needs to register for it first after which they are given with a unique eleven digit number used to communicate for everything regarding VAT and its filing.

Who should register for VAT?

Any firm/ business making a turnover of more than Rs 5 lakh needs to register for VAT

Documents required for VAT registration:

Required documents for registration for VAT are stated below:

  • PAN card copy
  • Identity proof of promoters
  • Additional security deposit/ security
  • Address proof of business

However the time consumed for registration may vary from state to state but generally it takes around 15 to 20 days for successful generation of registration number.

Process of VAT collection:

There are a few categories of persons who are exempt from paying this Advance Tax eg., people above age sixty years who do not own any business and people whose annual business turnover is more than 2 crores p.a. but they opt for 'presumptive schemes'. In the financial year 2016-2017 this exemption has been extended to doctors, lawyers and architects with annual turnover less than Rs 50 lakhs.

  • Account based collection: Most countries don't use this method of VAT collection except for Japan. Under this system, instead of using the sales receipt for tax calculation, it is calculated on value added, which is the difference between revenues and allowable purchases.
  • Invoice based collection of VAT: Unlike above mentioned system, this process uses invoice or sale receipt for calculation of VAT corresponding. When sellers sell goods, they mention the separate details of the VAT collected in the invoice. This system is adopted by majority countries in the world.

As per classification on the basis of timing of collection, VAT can be classified in following ways:

  • Accrual based collection: It matches the revenue with the time period during which the revenue is earned and also matches the cost of raw materials and expenses to the time period in which they were made. This method is very complicated as compared to the next method of collection of VAT.
  • Cash based collection: Under this system the cash that is being handled is given more emphasis instead of whether all the bills are paid. Date of receipt of payment is recorded as date of receipt of funds.