Thursday, August 7, 2008

FAQ- VAT (Orissa)

FREQUENTLY ASKED QUESTIONS ON VAT
Qs.No.1. What is VAT?
Ans. Each commodity passes through different stages of production and distribution before finally it reaches the Consumer. Some value is added at each stage of the production and distribution chain. Value Added Tax (VAT) is tax on value addition at each stage. Under VAT system, a dealer collects tax on his sales, retains the tax paid on his purchase and pays balance to the Govt. Treasury. It is a consumption tax because it is borne ultimately by the final Consumer. The tax paid by the dealer is passed on to the buyer. It is not a charge on the dealer. Hence, VAT is a multipoint tax system with provision for set off of tax paid on purchases at each point of sale.
Qs.No.2. How is VAT computed?
Ans. The dealer pays VAT by deducting the tax paid on purchases (input tax) from his tax collected on sales (output tax). Hence, VAT = Output Tax – Input Tax. For example: A dealer pays Rs.10.00 @ 10% on his purchase price of goods valued Rs.100.00. He sells the goods at Rs.150.00 and collects tax amounting to Rs.15.00 (@ 10%). He will pay Rs.5.00 (Rs.15.00- Rs.10.00) as he has already paid Rs.10.00 to his seller while purchasing those goods.
Qs.No.3. Why VAT?
Ans. One of the major pitfalls of the present origin based Sales Tax system is cascading. Since there is no set off of tax paid on purchases, the tax paid on purchases gets embedded in cost price. For example: a Manufacturer purchases inputs / raw materials worth Rs.500.00 and pays tax of Rs.50.00 @ 10%. Since he is not getting input tax credit, he will add Rs.50.00 to the cost of inputs/ raw materials. If he adds Rs.450.00 towards his labour and service and other expenses to produce a commodity using the raw materials/ inputs which also includes his profit (value addition), the value of his product becomes Rs.1000.00. When he sells the product, he collects tax, say Rs.100.00 @ 10%, which contains Rs.50.00 tax collected on value of input which has already been taxed at the time of purchases, Rs.5.00 i.e. tax on tax of Rs.50.00 paid earlier. In this way, there is double taxation and tax on tax, resulting in cascading. The product may also be used as an input for manufacturing another product, further cascading. Cascading increases the cost of production and makes the product uncompetitive. Further, since the existing sale tax system is a tax on sale without provision for set off of tax paid on purchases, it discourages ancillarisation. Ancillarisation means getting most of parts/ components manufactured from outside. To avoid paying tax, the large manufacturers instead of buying parts/ components from outside, manufactures themselves. This discourages the growth of small scale industry and increases concentration of economic power. The system has also an adverse impact on quality of the product, further reducing the competitiveness of the goods.
Under VAT system, there is not only provision for set off of tax paid on inputs/ raw materials, but also for capital goods. Input tax credit/ set off of tax paid on purchases eliminate double taxation and cascading, this also reduces the cost of production. Since VAT is a consumption type of tax, the tax load to be borne by the consumer, the goods are exported free of any load of tax in the commodity by way of allowing input tax credit in case of goods sold in course of inter-state trade and commerce and exported out of the country. The goods exported with no load of tax in it can have competitiveness in the market. VAT will create an environment where industry will grow and ultimately help growth of economy.
Qs.No.4. How is VAT different from Sales Tax?
Ans. VAT will have only four rates instead of large number of rats of Sales Tax, with off setting of tax on inputs against that on output; VAT does away with tax on tax. Claiming input tax credit under VAT ensures proper invoicing. Overall, these features of VAT encourage disclosure of complete information on business turnover.
Qs.No.5. Who is to be covered by VAT?
Ans. All business transactions carried on within a State by individuals, partnerships, Companies, etc. will be covered by VAT.
Qs.No.6. Who will not be covered by VAT?
Ans. VAT will not cover small business with a turnover below a certain limit. In Orissa, a general trader having annual turnover of Rs.2, 00,000/- or more will be covered under VAT. The dealer, who purchases goods from outside the State for resale inside the State, or sells to outside the State, is liable to pay tax on his first transaction. The taxable limit for works contractor is Rs.50, 000/- and for manufacturer is Rs.1, 00,000/-.
Qs.No.7. What are the tax rates under VAT?
Ans. There are just four rates under VAT- the zero rate (exempted goods), 1%, 4% and a general rate of 12.5%. These rates will be uniform in all States across the country. The same set of goods will be charged at the same rates in all the States. Most essential commodities are exempt from VAT or fall in the category of 4%.
Qs.No.8. How does VAT help trade?
Ans. Uniform rates of VAT will boost trade, 100% self assessment will reduce the tax payer’s need to visit tax department officer.
Qs.No.9. How does VAT help industry?
Ans. The provision of set of tax paid on purchase/input tax credit will eliminate cascading and double taxation. This will promote production efficiency of investment. Investment decisions will not, therefore, be based on tax consideration, tax holidays.
Qs.No.10. How does VAT help exports?
Ans. The goods exported are zero rated under VAT. That means, the rate applicable to such transaction will be zero and the exporter will get full input tax credit. This will make the exports competition.
Qs.No.11. What is zero rating under VAT? How does it differ from exempt goods?
Ans. Zero rate is applicable to goods for certain transactions under VAT and input tax credit is available on those transaction. Under VAT, the goods exported outside India, sold to an EOU and to a dealer having business under a Special Economic Zone (SEZ), Software Technology Park (STP), Electronic Hardware Technology Park (EHTP) are zero rated. In these transactions the tax rate will be zero and input tax credit will be available. The propose is that the goods exported or sold to outside the State will be free of any load of tax in it, which will increase competitiveness and encourage exports. Exempt goods are those goods whose tax rate is zero, but input tax credit will not be available. Essential items such as agricultural implements manually operated or animal driven, books, periodicals, journals, fresh milk, etc. are in the exempted category.
Qs.No.12. Why are sales to SEZ, STP, and EHTP & EOU zero rated?
Ans. SET, STP etc. are being set up to promote industry and create industrial base. Sales to a unit under SEZ, STP, etc. are treated on a par with export. Hence, the goods sold to SEZ, STP are zero rated to encourage export.
Qs.No.13. VAT is a multipoint taxation system. Will it not escalate prices of the goods?
Ans. Input tax credit/ set off of tax paid on purchases will eliminate double taxation and cascading, thereby, it will reduce the cost of production. A dealer will not add the tax paid on purchase to the value of a commodity as tax paid is passed on to the buyer, ultimately to be borne by the consumer. In the existing sales tax system, sale price includes tax paid under the Act, but under VAT, sale price does not include tax paid under the Act. Hence, a dealer will not fix the sale price taking into account the tax paid on purchases. There is provision for set off of tax paid if the goods are exported or sold in course of inter-state trade and commerce. This is applicable to all the State’s VAT Law. For example, if a dealer has paid tax Rs.50.00 on his purchases of goods valued Rs.500.00, and adds value to the tune of Rs.450.00, under the sales tax system, he will sell the goods in course of inter-state trade at Rs.1000.00 + CST @4% (Rs.40.00). Under VAT, he will most likely sell the goods at Rs.950.00 + CST @ 4% (Rs.38.00) as he will get input tax credit of Rs.50.00. CST may be phased out completely within two years. Under VAT, a dealer in Orissa is likely to get the goods at Rs.988.00 instead of Rs.1040.00 and after two years, the goods will be available to the consuming state at Rs.950.00 instead of at Rs.1040.00.
Qs.No.14. Under VAT, value of goods and tax are mentioned separately on the invoice. Will not the buyer know the profit margin of a dealer?
Ans. No. The price of the goods the dealer sells and the tax charged are to be indicated in the bill separately. For example, a dealer sells a TV at Rs.10, 000.00 and charges VAT @ 12.5%, he will indicate in the tax invoice the price of TV i.e. Rs.10, 000.00 and tax @12.5% i.e. Rs.1250.00. It will not be known to the buyer at what price the dealer has purchased the goods.
Qs.No.15. The Gross Turnover for a general trader is only Rs.2, 00,000/- to be liable to pay VAT and get registered. What does it mean, Is it not low?
Ans. Under the existing OST Act, the gross turnover for a general trader to be liable to pay tax and get registered is also Rs.2, 00,000/-. The same taxable limit is kept under VAT. Gross turnover under OST Act means turnover of sales + turnover of purchases under section 3-B to be taxed on purchase turnover; the sale turnover of those goods (under Sec.3-B) are not taken into account while calculating gross turnover. Under VAT Act, gross turnover means turnover of sales plus turnover of purchases under section-12. In certain circumstances, some transactions are taxable on purchase turnover as per Section-12. The sale turnover of those transactions is not taken into account while calculating gross turnover. Moreover, under Sales Tax Act, turnover of sales includes tax paid under the said Act. But under VAT, the turnover of sales excludes the tax paid under VAT Act.
Qs.No.16. Tax rate applicable to different goods under the VAT Act are 1%, 4%, 12.5% and 20%. The goods which are not specified in the Act are taxable @.12.5%. Is it not too high?
Ans. Under the Sales Tax Act, the goods are presently taxed at the rates of 1%,4%,8%,12% and 20%. The goods like Petrol, diesel, liquor, narcotics etc. are presently taxed at 20%. The goods, which have not been specified, are presently taxed @.12%. Under VAT Act, the tax rates for different goods are taxable at 1%,4%,12.5% and 20%. The rate of 20% is applicable to goods like Petrol, diesel, liquor, narcotics etc. The goods, which have not been specified, are to be taxed @ 12.5%. The rates are uniform to all the states of India. Since the provision for set off of tax paid on purchases under VAT system will eliminate double taxation and cascading, this will most likely reduce the cost of production and prices of the commodities. Hence, 12.5% tax rate is not high, if we compare with the tax rates prevailing under Sales Tax Act, and take into account set off of tax on input cost.
Qs.No.17. There is provision of set off of tax paid on purchases. Will not the Govt. incur loss on account of introduction of VAT?
Ans. Sales Tax is a single point taxation system. For administrative convenience, most of the goods are being taxed at first point. Then, the goods are sold as tax paid, the Govt. does not get the tax on value addition at subsequent points of sale. Under VAT the revenue collected on the first point of sale is assured, then tax is collectible on subsequent points of sales of a goods. Under VAT there will be no incentives/ exemptions to industries. The loss of revenue on account of set off/ input tax credit will be made up by tax collectible on subsequent stages of sale and withdrawal of incentives. The Revenue Neutral Rate (RNR) has also been so fixed so as not to incur any loss on account of introduction of VAT. The Govt. of India will also compensate if there will be any loss in the initial years.
Qs.No.18. Some say, maintenance of accounts under VAT will be complicated. Will it not increase cost of compliance for the dealer?
Ans. Under the Sales Tax Act, a registered dealer is required to maintain (a) a true account of the value of goods bought and sold by him,(b) the books of accounts relating to his business (c) An annual account of the stock of goods purchased and sold by him showing the opening balance and the closing balance at the beginning and close of each accounting year. Besides, he is required to maintain accounts of forms such as Form-XXXIV and IPR related forms. Under VAT, there is no need of these forms; hence the dealer will not keep account of these forms. Under VAT, the dealer is required to maintain books of account similar to that of OST Act, so as to justify the claim of set off/ input tax credit etc. In comparison to the requirement under the Sales Tax Act, it is rather simple under VAT.
Qs.No.19. There is apprehension that under VAT, there will be much harassment by the Department Officers.
Ans. The apprehension is unfounded. Under VAT Act, steps have been taken to encourage voluntary compliance. A dealer will assess his own tax liability and pay the tax. He will not be assessed by the Department Officer as it is being done under OST Act. There is no renewal of registration certificate. Once a dealer is registered,, he will continue to be registered. A dealer will not come to the Office for getting his registration certificate renewed every year for assessment. There will be Audit based assessment. Selection for audit will be done on the basis of objective criteria. There will be no human bias in selecting a dealer for audit. Once selected, audit will be undertaken at dealer’s premises with prior notice. Audit will be taken up by a team, not by an individual. Audit visit report will be submitted to another Wing i.e. Assessment Wing. If there is material in the Audit visit report against the dealer, then assessment will be taken up. And notice of assessment will be issued along with supply of a copy of the Audit visit report. These are provisions under the Act and Rule so as to avoid harassment to the dealers by Department Officers. Twenty percent of the dealers will be selected on random basis for audit in a year. That means, if a dealer is paying tax regularly, there is no charge received from any quarter against him, he will be audited once in five year.
Qs.No.20. Some say prosecution provisions under VAT Act is very stringent. On slight mistake, a dealer can be sent to jail. How far is true?
Ans. This is not true. The procedure for prosecution under VAT Act is similar to that of OST Act. Like the provision under OST Act, no Court shall take cognizance of any offence except with the previous sanction of the Commissioner. No Court inferior to that of a Magistrate of the first class shall try the offence. Moreover, another safeguard is given under the VAT Act. The Commissioner will investigate an offence before giving sanction for prosecution. The offence & prosecution provision under the OST Act have not been abused by the Department Officers. The apprehension that the provision under the VAT Act that to, with additional safeguard, will be misused by Department Officer is unfounded.
Qs.No.21. What is output Tax?
Ans. This is the VAT you charge your customer when you are a taxable person making taxable sales. A taxable person is an individual, Partnership, Corporation, etc. who is registered under VAT. Persons who make taxable sales above the prescribed limit are required to register. When you are registered, VAT is chargeable on all the taxable sales you make. This is your output tax.
Qs.No.22. What is Input Tax?
Ans. The tax you pay on your purchases is input tax. Many of the things you buy will carry VAT charge, but if you are registered under VAT you can normally claim a credit for the VAT charges on most business purchases. It includes not only the VAT on your purchases of raw materials or on goods purchased for resale, but also the VAT on things like Capital goods, such as machinery or equipment for use in the business.
Qs.No.23. Can I always claim credit for my input tax?
Ans. Credit for input tax is allowed to registered dealers against tax paid in respect of sales or purchases made within the State. Input tax credit is allowed on goods if a registered dealer has purchased from registered dealers for the purpose of-a) sale or resale by him in the Stateb) use as inputs or as capital goods in the manufacturing or processing of goods [except in cases of negative list of goods, exempt goods and demerit goods such as liquor, petrol, narcotics, etc]c) sale to outside the State, Export, or sale to SEZ, STP, etc.d) for use as containers for packing of goodse) stock transfer to any place outside the State in excess of 4%.Input Tax credit shall not be allowedi) if goods are purchased for sale, but given away as free sample or giftii) to a dealer under composition schemeiii) in case of negative capital goods such as capital goods purchased prior to 1.4.05, capital goods not connected with the business of the dealer, etc.iv) against CST paid, or tax paid in any other Statev) in respect of stock of goods remaining unsold at the time of closure of businessvi) in respect of goods, which are not sold because of theft, damage or destructionvii) if invoice is not availableviii) if goods purchased from a dealer whose R.C. has been suspendedix) in case of exempt goodsx) in respect of schedule ‘C’ goods such as liquor, petrol, narcotics, etc.
Qs.No.24. What if I make exempt sales?
Ans. If you are making exempt sales as well as taxable sales, you may only be entitled to claim a credit for the part of input tax related to taxable supply. Input tax credit for exempt sales is not available.
Qs.No.25. What proof do I need to claim Input Tax?
Ans. You must have a copy of a Tax invoice to substantiate a claim for Input Tax credit.
Qs.No.26. How do I claim my Input Tax credit?
Ans. When you complete your VAT return for the month/quarter as the case may be, you can claim deduction for Input Tax credit against the VAT collected by you on your taxable sales. If the claim for Input tax credit exceeds the amount payable by you on the output in the return, the excess input tax credit will be carried forward to the next tax period/periods. The excess amount will be carried forward till it is adjusted or up to 24 months. After 24 months you can claim refund or opt for further carry forward. If you are an exporter, you will get refund of Input Tax on your purchases on month-to-month basis, on application.
Qs.No.27. Who has to be registered under VAT Act?
Ans. The following dealers have to be registered(I) A dealer whose gross turnover exceeds the taxable limit during a period of 12 consecutive months. Taxable limit in relation to a(a) dealer who purchases goods from or sells to outside the State is Nil(b) works contractor Rs.50,000/-(c) manufacturer Rs.1,00,000/-(d) general trader Rs.2,00,000/-(II) who is liable to be registered under Central Sales Tax Act(III) who is registered or liable to be registered under OST Act or CST Act(IV) The dealer who is registered under Orissa Sales Tax Act and his registration certificate is valid on the day before the appointed day is deemed to be registered under the VAT Act.A persons who intends to establish business for purpose of manufacturing or processing of taxable goods exceeding Rs.2 lakh in a year may take voluntary registration, even though his turnover does not exceed taxable limit
Qs.No.28. What is Gross Turnover?
Ans. Gross Turnover of a dealer is the turnover of sales plus turnover of purchases under Section 12 of the VAT Act. Section 12 provides the circumstances where tax is leviable on purchase turnover. In those cases, instead of sale turnover of the goods, purchase turnover is taken into account while calculating the gross turnover.
Qs.No.29. What is Taxable Turnover?
Ans. Taxable turnover means the turnover on which the dealer is liable to pay tax. Taxable turnover is determined after making the following deductions from the Gross turnover:(a) the turnover of goods exempt from tax(b) the turnover of sale of goods sold in course of inter State trade and commerce, to outside the territory of India, sold to a unit under SEZ, STP, EHTP or to an EOU.(c) All amounts allowed as cash discount, or trade discount(d) Cost of outward freight by a dealer for transportation of goods for the purchases.(e) In case of works contract, the expenditure incurred towards labour and service.
Qs.No.30. Who will come under composition scheme?
Ans. Composition scheme is for the small dealers/retailers. A dealer having gross annual turnover within Rs.10 lakh will come under composition scheme, provided- he is not a manufacturer- he neither purchases or receives goods from outside the State nor sells goods to outside the State and- ordinarily effects sales to consumers A dealer under composition will pay tax at a low flat rate on his taxable turnover and he will not avail input tax credit. If a dealer under composition scheme wants, he can become a VAT dealer on application, pay VAT and avail input tax credit. Small contractors can opt to be under the composition scheme. They will pay VAT at a low rate to be prescribed and will not avail input tax credit.
Qs.No.31. As a registered dealer under OST Act, I shall be deemed to be registered under VAT. What about my registration number? Will it remain the same?
Ans. Every VAT dealer will be allotted a Tax Identification Number (TIN) and the dealers under the composition scheme will be allotted small retailers Identification Number (SRIN). TIN is an 11 digit number, the first two given for State code; SRIN is a seven digit number, first two given for identifying the Circle. A dealer having business in more than one place in the State will be given one registration certificate and one TIN. He will display the registration certificate in his places of business.
Qs.No.32. Will there be renewal of certificate?
Ans. There is no provision of renewal under VAT Act. A dealer once registered will continue to be registered.
Qs.No.33. What will be the amount of security to be deposited under VAT Act at the time of registration?
Ans. Security is not mandatory under VAT Act; there will be no ritual of security. Only in cases, where there will be apprehension of loss of revenue, security will be demanded.
Qs.No.34. Will the provision of suspension of registration certificate be misused by the officers?
Ans. The Registration Certificate of a dealer will be suspended if a dealer contravenes the provisions of the Act or does not comply with the provisions of Act & Rules. Prior permission of the Commissioner is to be obtained before an officer suspends the registration certificate of a dealer. If the R.C. of a dealer is suspended, notice will be issued immediately and the dealer to produce the relevant documents to rebut suspension within 30 days from the date of suspension. If the dealer makes do the deficiency for which his R.C. was suspended, his R.C. will be restored.
Qs.No.35. How do I calculate my output tax when I am selling to consumers without separately showing the VAT?
Ans. For taxable sale, VAT charged to be indicated separately on the invoice. If tax inclusive invoice has been issued, the amount of VAT included in the value of the sales of the goods can be calculated by applying the tax fraction to the gross value of sales at each tax rate. Tax fraction is r in which ‘r’ represents the rate of tax applicable to the sale. r + 100
Q.No.36. What is a tax period?
Ans. A dealer is required to file return for a period, which is called tax period. A tax period is a month or a quarter. A quarter means a period of three months ending on 31st March, 30th June, 30th September and 31st December. For big tax payers, the tax period is one month and for small dealers a quarter. The Commissioner is to decide the tax period for a dealer.
Q.No.37. When is the dealer required to file return?
Ans. A dealer is required to furnish return within 21 days from the expiry of a tax period.
Q.No.38. What happens if a dealer discovers an omission after he has filed the return?
Ans. The dealer can file revised return before the date on which the return for next tax period becomes due.
Q.No.39. What happens when a dealer defaults in filing return?
Ans. In case of default, the dealer is required to pay interest @2% per month from the date the return was due to the date of payment.
Q.No.40. How will a dealer be assessed?
Ans. There is no regular assessment as in the OST Act. The dealer will assess himself for each tax period. He will calculate his output tax, deduct from it the input tax he has paid and pay the balance along with the return. The return will be accepted as assessed subject to adjustment of any arithmetical error apparent on the face of the return. If a dealer does not file return, provisional assessment will be taken up. If the dealer furnishes return along with producing evidence of payment of tax, the provisional assessment shall stand revoked. There will be audit based assessment.
Q.No.41. What is audit procedure?
Ans. Selection of dealers for audit will be done on the basis of risk parameters or on random basis. Twenty percent of dealers may be selected to be audited in a year. Audit will be undertaken at dealer’s premises with prior notice. Audit is to be done by a team. Audit Visit Report will be submitted with seven days from the date of completion of the audit. If there is material in the Audit Visit Report against the dealer, assessment will be taken up by officer of assessment wing. Notice for assessment will be issued along with a copy of the Audit Visit Report, so that a dealer can know in advance the charges against him and prepare his defence.
Qs.No.42. How can a dealer get his refund?
Ans. Refund flowing from an order shall be given to the dealer within 60 days from the date of receipt of the order. The dealer need not apply for such refund. In case of export, the dealer will make an application for refund. Refund will be granted to an exporter within 90 days from the date of application after an audit. The audit has to be completed within one month from the date of application. In case of delay, interest @ 8% per annum will be paid after 60 or 90 days as the case may be.
Qs.No.43 Appeal against an order will be entertained after full payment of admitted tax and twenty percent of the amount in dispute. Is it not unfair?
Ans. The amount of tax admitted by a dealer due to the Govt. should be paid in full. As discussed earlier, there is no regular assessment as in the OST Act. There will be audit based assessment. There is little scope for arbitrary assessment in the procedure to be followed for audit and audit based assessment. Abundant caution has been taken so that assessing authority can not act arbitrarily. If there is no material against the dealer in the Audit Visit Report, assessment will not be taken up. If there is some material in the Audit Visit Report, assessment will be taken up with prior supply of a copy of the Audit Visit Report to the dealer. Since there is little chance of arbitrariness in the assessment a dealer is required to pay 20% of amount in dispute for his appeal to be entertained along with payment of admitted tax in full.
Qs.No.44. Jurisdiction of the Act.
Ans. The VAT Act is applicable to the transactions made inside the State. However, the VAT Act has been prepared by the States taking into consideration the national consensus on the issues to bring in uniformity in all State Vat laws. Gradually State VAT will lead to emergence of an Indian common market.
Qs.No.45 How many countries have adopted VAT?
Ans. Now more than 130 countries including neighboring, Pakistan, Bangladesh, Nepal, Sri Lanka and China have adopted VAT.
Qs.No.46. Can VAT be successful in a federal country like India?
Ans. VAT has been successful in federal countries like Canada and Brazil. It is marvel to find States in Indian Union agreeing to a general consensus on critical points relating to VAT. States have agreed to a common tax rate. It is a land mark in cooperative federalism. States have shown keen interest in implementing VAT soon.
Qs.No.47. Why America has not accepted VAT?
Ans. In America there is retail sales tax which means tax is paid on the last consumer sale point, which includes all the value additions made in previous stages. VAT at each stage ensures flow of right tax at right time. It helps planning of income and expenditure.
Qs.No.48. What will be the fate of Sales Tax revenue under VAT in the State? Will there be any loss?
Ans. Ideally there should not be any loss on account of introduction of VAT. This has been evidenced from the experience of Haryana which had introduced VAT in the year 2003-04. Haryana had a sales tax growth of 15% during the year 2003-04. It also sustained the growth rate more vigorously during the year 2004-05. The growth till September is 29%. In the event of any loss of sales tax revenue on account of introduction of VAT, the Central Government will compensate the loss each month @ of 100% in the first year, 75% in the second year and 50% in the third year.
Qs.No.49. What is the methodology for calculation of compensation?
Ans. The year 2004-05 will be taken as the base year. Going backwards for five years, the average of 3 best years will be taken as the growth rate of the State. Taking the growth rate the sales tax which would have been collected during the year 2005-06 under the present regime will be calculated. The actual collection under the VAT regime will be deducted from the sales tax revenue which would have been collected under the OST regime to arrive at the loss.
Qs.No.50. What about CST Act and CST rate?
Ans. CST Act will continue. The present CST rate @ 4% will also continue for the year 2005-06. It will be gradually phased out.
Qs.No.51 What about the Entry Tax, Luxury Tax, Profession Tax and Entertainment Tax?
Ans. In Orissa Entry Tax is in lieu of Octroi. So it will continue and Empowered Committee had approved it. Luxury Tax will also continue but it may be subsumed in VAT later on. Profession Tax, Entertainment Tax will continue as those are not tax on sales.
Qs.No.52. Will there be any surcharge under VAT?
Ans. There will be no surcharge under VAT as it was under OST.
Qs.No.53. What about input tax credit on opening stock?
Ans. In put tax credit will be given in respect of the goods in the opening stock which were purchased within one year before the date of introduction of VAT. The dealers are required to furnish a statement of their opening stock within one month from the date of introduction of VAT. Input Tax credit on opening stock will be given within 6 months after 3 months from the date of introduction of VAT.
Qs.No.54. What about IPR exemptions and concessions?
Ans. Exemptions and concessions have been withdrawn in the VAT Act. Un-availed period of exemptions will be converted into deferrals.
Qs.No.55. What about sales to International Organizations?
Ans. There will be no tax exemption on sales to International Organizations but tax paid by them will be refunded.
Qs.No.56 Will there be input tax credit for capital goods?
Ans. There will be input tax credits on capital goods purchased from inside the State after introduction of VAT. Input tax credit on capital goods will be given within 36 months after commercial production and first sale. Input tax credit on capital goods costing less than Rs.1.00 lac will be given in lump sum.
Qs.No.57. What about CST Sales and Branch Transfers?
Ans. C.S.T. will be zero rated. It means there will be zero tax rates on C.S.T. sales. Input tax credit is available on C.S.T. sales. In case of branch transfer/consignment sale input tax credit is available in excess of 4%.
Qs.No.58. What is turnover of sales in course of import? ( Section-11).
Ans. The turnover of import (Sec.11 (2) (b) (iii) means the turnover of goods imported from out of the territory of India.
Qs.No.59. Whether declared goods will be subject to tax at single point or multipoint?
Ans. Declared goods will be subject to tax at multipoint. Section 15 of the CST Act has since been amended
Q.No.60. A registered dealer under VAT receives free medicine as quantity discount from a Company and resells the same in the State of Orissa. Whether he is liable to pay tax on the receipt value of such free medicines received?
Ans. No. But he is liable to pay tax on the sale turnover of such free medicines
Q.No.61. A branch of a company intends to establish business in Orissa for trading of medicine. Whether he will get registration after his taxable limit exceeds Rs.2, 00,000/- or he can be granted R.C. as an importer?
Ans. If the company receives or purchases stock from outside the state, it is liable to pay tax from its first sale in Orissa. The taxable limit for an importer is Nil. [Sec.10 (4) (a)].
Q.No.62.. A medicine whole seller purchases T.V. and refrigerator from the registered dealers of Orissa on payment of tax for distribution among doctors in connection with promotion of his sales. Whether he will be entitled to avail ITC?
Ans. No. [Sec.20. (8) (a)].In case of taxable purchases, when distributed free of cost, no input tax credit is available.

8 comments:

Raghu said...

Thanks Mr AMit
May I Know about OVAT requirements & Provisions for Poultry Co- Operative Society ?

IMVS, Cuttack said...

Mr Amit,
What are the exemption limits for getting a VAT Registration in Orissa for different categories. My knowledge is 50,000/- for works contractor, 1,00,000/-for manufacturer and 5,00,000/- for traders (new rule)
If there are any changes in ur notice please inform.

SYSTEM HOUSE said...

Dear Mr. Amit,

We are electrical contractor. Kindly let me know the VAT rate for Switchgear Panel, Other Electrical Panel, Capacitor Bank Panel, Lightening Arrestor etc.

Regards,
Sushanta

saroj satapathy said...

Dearsir
what is the rate of tax on branch transfer of raw matarial(iron ore fines,5-18 etc)in orissa

pupun said...

sir
me pupun dutta from delhi
qu. i am registered dealer of vat under orissa vat under composition scheme. in my bill i charge service tax and vat to our client belongs from orissa. is there any notification for that please give that and also give chart how to calculate vat under wct.

Thank you

Pravat Ranjan Mishra said...

What will be the calculation of partial entry tax set off under orissa entry tax act

Anonymous said...

I understand that UNITED NATIONS agencies are exempt from tax in Odisha. Is this applicable for all kinds of service and goods procurement?

Susanta (CA FinaL) said...

Dear Amit Sir,

Is Composition Scheme Benefit available to Grocery Shop/ Provisional Stores with Sales more than 50 Lakhs annuallty.

I have seen this trend in AP State where the sales is very high in the provisional stores and they issue Invoice without Tax.

As for Grocery Wholesalers there are 1000s of products to be dealt with and Most purchases are local Purchases without Input BILL?

What is the Solution for a dealer in this field