Note on PUNJAB VAT

VAT was introduced in the State of Punjab with effect from 1st April 2005. The sections below give a synopsis of the Punjab Vat Act, Rules and Notifications.

INDEX:

A. Definitions (Sec 2)

B. Rates of Tax (Sec 8)

C. Input Tax Credit: (Sec 13) (Rule 18 )

D. Zero Rated Sales (Sec 17)

E. Levy of Purchase Tax (Sec 20)

F. Registration, Amendment, Cancellation and Security (Sec 21 - 25) (Rule 3)

G. Returns & Payment of Tax (Sec 26)

H. TDS on works contract (Sec 27)

I. Audit of Returns (Sec 28)

J. Assessment of Tax (Sec 29)

K. Audit of Accounts (Sec 43)

L. Maintenance of Accounts (Sec 42) (Rule 53)

M. Period of Retention of Accounts (Sec 44)

N. Requirements of tax invoice (Sec 45) (Rule 54)

O. Requirements of Retail Invoice (Sec 45) (Rule 54)

P. Procedure for receiving goods from outside the State (Rule 65)

Q. Procedure for sending goods outside the State (Rule 65)

1. Definitions (Sec 2):

a. “Account books” means record of business transactions and includes accounts, registers and documents maintained in any manner including electronic medium. Sec 2(a)

b. “Capital goods” means any plant, machinery or equipment including equipment for pollution control, quality control, laboratory and cold storage, used in manufacturing, processing and packing of taxable goods for sale. Sec 2(d)

c. “Goods” means all kinds of movable property, whether tangible or intangible, other than newspapers, actionable claims, money, stocks, shares and securities and includes livestock, growing crops, grass, trees, plants attached to or forming part of the land, which are agreed to be severed before the sale or under the contract of sale. Sec 2(k)

d. “Place of business” means any place where a person purchases or sells goods and includes the place where such person stores, processes, produces or manufactures goods or keeps books of accounts or documents or any other place where business activity is conducted. Sec 2(u)

e. “Quarter” means a period consisting of three months, commencing from the first day of April, July, October and January of a calendar year. Sec 2(y)

f. “Retail Invoice” means an invoice issued to the purchaser by a taxable or registered person or a casual trader, listing therein the goods, sold, with price, quantity and value. Sec 2(zb)

g. “Turnover Tax” (in short referred to as TOT) means a tax leviable on the taxable turnover of a registered person as per the provisions of this Act. Sec 2(zq)

h. “VAT Invoice” means an invoice issued by a taxable person to another taxable person listing therein the goods supplied, with the price, quantity, value and VAT charged. Sec 2(zs)

i. “Month” means a calendar month. Rule 2(f)

2. Rates of Tax (Sec 8):

a. Schedule A - 0% Goods declared tax free under section 16b. Schedule B - 4%c. Schedule C - 1%d. Schedule D - 20%e. Schedule E – Special Ratesf. Schedule F – 12.50% Not elsewhere specified

3. Input Tax Credit: (Sec 13) (Rule 18):

a. Input tax credit shall be allowed only to the extent it exceeds 4% on purchase of goods which are stock transferred outside the state or used in the packing of taxable goods sent outside the state. [Sec 13(2)]

b. Input tax credit will not be available on the following items [Sec 13(5)]:

i. Automobiles including commercial vehicles, two wheelers, three wheelers unless the person is in the business of dealing of these goods

ii. Petrol, diesel, aviation turbine fuel, etc unless in the business of dealing of these goods

iii. Civil structure and immovable goods or properties

iv. Office equipment and building material unless dealing in them

v. Furniture, fixtures including electrical fixtures and fittings, unless dealing in them

vi. Air-conditioning units, air circulators and refrigeration units, unless dealing in them or where air-conditioning, air circulating or refrigeration is essential for sale or storage of taxable goods or in the manufacturing process of taxable goods.

vii. Weigh bridge

viii. Goods used in manufacture, processing or packing of exempt goods

ix. Goods used in generation, transmission and distribution of electricity unless for captive consumption.

x. Provision of food, beverage and tobacco products unless dealing in them

xi. Goods used for personal consumption or gifts

c. Input tax credit on goods remaining in stock at the time of closure of business shall be reversed. [Sec 13(9)]

d. Input tax credit shall be non-transferable, except where the ownership of the business of a person is entirely transferred. [Sec 13(11)]

e. Input tax credit shall be allowed only against the original VAT invoice and will be claimed during the period in which such invoice is received. [Sec 13(12)].

f. In case the original VAT invoice is lost or mutilated, the input tax credit will be available only after the designated officer has determined the credit in the prescribed manner. [Sec 13(13)]

g. The onus to prove that the VAT invoice on the basis of which, input tax credit is claimed, is bonafide and is issued by a taxable person, shall lie on the claimant. [Sec 13(15)]

4. Zero Rated Sales (Sec 17):

Where any taxable goods are exported outside the territory of India or are supplied in the course of such export falling within the scope of section 5 of the Central Sales Tax Act, 1956, such sales shall be zero-rated. On such sale, no output tax is payable by any person:

Provided that a taxable person making zero-rated sale shall be eligible for input tax credit in relation to such sales.

5. Levy of Purchase Tax (Sec 20):

Purchase tax shall be levied if a registered person purchases goods from an unregistered person and

a. Uses them in the manufacture of tax free goods under Section 16

b. Uses them in the manufacture of taxable goods and stock transfers the taxable goods outside the State

c. Disposes the goods in any other mannerd. Stock transfers the goods outside the State

The rate of purchase tax will be as per the Schedule Rates.

No purchase tax has to be paid in case goods are purchased from unregistered persons for sale within the State.

6. Registration, Amendment, Cancellation and Security (Sec 21 - 25) (Rule 3):

a. Application has to be made within 30 days from the date a person becomes liable to pay tax

b. The application for registration has to be signed by the Managing Director in case of a company or any person authorized by the Board.

c. The Application has to be made in Form VAT-1, along-with the receipt in Form VAT-2 of a fee of Rs.500.

d. A declaration has to be given to the designated officer stating the name of the person who shall be the manager of the business.

e. This declaration has to be submitted within a period of 30 days from the date of registration and in case of change, the revised declaration has to be submitted within 30 days of such change

f. A security of Rs.50,000 has to be furnished at the time of applying for registration. The security can be in the form of a bank guarantee from a local scheduled bank in Form VAT-3

g. The registration certificate will be issued by the Department in Form VAT-4. The registration certificate will be issued by the Department within 30 days of submission of application and it shall be valid from the date of receipt of application for registration.

h. The registration certificate shall be displayed at the principal place of business and the copies shall be displayed at every additional place of business within the State.

i. Application for amendment in registration certificate has to be filed in Form VAT-5 within a period of 30 days from the date of occurrence of the event necessitating such change. The department shall make the amendment and inform in Form VAT-6

7. Returns & Payment of Tax (Sec 26):

a. Return has to be filed quarterly in Form VAT-15 along-with Form VAT-18, VAT-19, VAT-23 and VAT-24 within a period of 30 days form the end of the quarter along-with the proof of payment of tax.

b. If the annual turnover does not exceed Rs.1 crore then the tax has to be paid quarterly. If tax is being paid through demand draft or cheque it can be deposited along-with the quarterly return which should then be filed within 20 days from the end of the quarter.

c. If the annual turnover exceeds Rs.1 crore, then the tax has to be paid monthly within 20 days from the end of the month along-with Form VAT-16 and the payment for the last quarter shall be made along-with the quarterly return within 20 days from the end of the quarter.

d. Tax has to be paid through demand draft in Challan VAT-2 (90%) and VAT-2A (10%)

e. Return can be rectified before the end of the next financial year. For example return for the month of Mar’08 can be rectified up to Mar’09

f. Annual statement has to be filed in Form VAT-20 by the 20th of November every year with details of stock held as on the 31st March, trading account, p&l account and balance sheet

g. Interest applicable @ 0.5% per month for late payment of taxes and the rate is 1.5% per month where the late payment is on account of rectification of return. In all cases part of the month shall be considered as one month.

h. Penalty @ 2% per month on the amount of tax due is payable in case of late payment of tax. In all cases part of the month shall be considered as one month.

i. For claiming deduction of stock transfers the following details have to be submitted to the department at the time of assessment:

i. Description of goodsii. Quantity or weight of goodsiii. Name of the transporteriv. Destinationv. Vehicle Number, LR No and LR Datevi. Name and address of the consignor in the State and

consignee outside the Statevii. Name and address of purchasing person outside the Stateviii. Invoice number and dateix. Amount of invoice

8. TDS on works contract (Sec 27):

a. TDS on works contract applicable for contracts exceeding Rs.5 lakhs only

b. The details of the contract have to be submitted to the Department in Form VAT-25 within a period of 30 days from the date of entering into the contract

c. TDS has to be deducted at the time of payment and not at the time of booking

d. The rate of TDS is 2% and has to be deposited within 15 days from the end of the month.

e. Monthly return in Form VAT-27 has to be filed within 15 days from the period of deposit of TDS.

f. TDS certificate has to be issued in Form VAT-28

g. Application has to be made for allotment of Tax Deduction Account Number (TAN) in Form VAT-26

h. Penalty for non deduction is equal to the amount of tax not deducted or deducted but not deposited as the case may be

i. Interest for late payment is 1.5% per month. Part of a month to be considered as a month.

9. Audit of Returns (Sec 28):

a. The commissioner or the designated officer may audit or cause to be audited the returns filed by a dealer

b. The audit can be carried out within a period of 6 years from the date of furnishing of returns

10. Assessment of Tax (Sec 29):

a. The department shall send a notice within one year from the end of the financial year to which the return relates for assessment

b. If no notice is sent within one year from the end of the year to which the return relates, the acknowledgement of the return shall be deemed to be an intimation of either no sum payable or no refund is due.

c. The Commissioner may within 3 years after the date when annual statement was filed or due to be filed, whichever is later, when make an assessment of tax if he has reasons to believe that the dealer has escaped tax

d. If the circumstances warrant, the Commissioner may by an order in writing allow assessment after 3 years but not later than 6 years from the date, when annual statement was filed or due to be filed by such person, whichever is later.

11. Audit of Accounts (Sec 43):

a. Audit by a Chartered Accountant is applicable if turnover exceeds 50 lakhs p.a.

b. The annual statement in Form VAT-20 has to be accompanied with Part-B duly certified by a Chartered Accountant.

12. Maintenance of Accounts (Sec 42) (Rule 53):

a. Monthly Vat account specifying total output tax, total input tax and net tax payable or the excess credit due for carry forward.

b. Purchase records (local and inter-state) [VAT-31]c. Local Sales records tax rate-wise(local and inter-state) [VAT-32]d. Record of inter-state sales and transfer of goodse. Details of input tax calculationsf. Stock recordsg. Annual accounts including P&L and Balance Sheeth. Bank records

13. Period of Retention of Accounts (Sec 44):

Records have to be retained for a period of 6 years after the end of the year to which they relate or until the assessment is over, whichever is later

14. Requirements of tax invoice (Sec 45) (Rule 54):

a. Tax invoice has to be issued in triplicate and the words original, duplicate and triplicate have to mentioned on the invoices clearly

b. “Input tax credit is available to a person against this copy” has to be printed on the original copy

c. “This copy does not entitle the holder to claim Input Tax Credit” has to be mentioned on the second copy and is to be used for the purpose of transportation of goods

d. The last copy has to be retained by the seller

e. The word “VAT INVOICE” have to be prominently printed on the invoice

f. The VAT invoice should contain the following details:

i. Consecutive serial noii. Dateiii. Name, address and registration number of the selleriv. Full description of goodsv. Quantityvi. Valuevii. Rate and amount of tax chargedviii. Total valueix. Mode of transportx. Signature of authorized agent

15. Requirements of Retail Invoice (Sec 45) (Rule 54):

a. Retail invoice has to be issued in duplicate

b. First copy to be issued to t he buyer and last copy to be retained by the seller

c. The Retail invoice should contain the following details:

i. Consecutive serial noii. Dateiii. Name, address and registration number of the selleriv. Full description of goodsv. Quantity

vi. Valuevii. Total valueviii. Signature of authorized agent

16. Procedure for receiving goods from outside the State (Rule 65):

By Road:

a. Any goods entering the State of Punjab from outside the State have to be accompanied by a declaration in Form VAT-36.

b. Form VAT-36 need not accompany the goods if the value of the goods does not exceed Rs.10,000

c. Form VAT-36 has to be obtained from the Department by making an application in Form VAT-36A by paying a fee of one rupee for each form

d. A register of Form 36A has to be maintained in Form VAT – 36B. A copy of the register in Form VAT-36B has to be submitted to the Department at the time of making application for forms

e. The dealer has to fill all the three copies of the Form VAT -36.

f. The original and duplicate part of Form VAT-36 has to be sent to the consignor who will be sending the goods from outside the State

g. The triplicate part of Form VAT-36 has to be retained by the dealer

h. The transporter has to carry the original and the duplicate part of Form VAT-36 along-with the goods

i. On entering the State of Punjab, the transporter has to produce the above counterfoils to the Information Collection Centre (ICC).

j. The ICC shall stamp both the copies of Form VAT-36, keep the original with him and return the duplicate part of Form VAT-36 to the transporter

k. The transporter will carry the duplicate part of Form VAT-36 with the goods during their transportation in the State

l. The transporter will hand over the goods as well as the duplicate part of Form VAT-36 to the consignee (dealer)

m. The dealer has to preserve both the copies of Form VAT-36 (duplicate and triplicate) as it will have to be produced at the time of assessment

By Rail, Air, Sea, Post or Courier:

a. Any goods entering the State of Punjab from outside the State have to be accompanied by a declaration in Form VAT-36.

b. Form VAT-36 need not accompany the goods if the value of the goods does not exceed Rs.10,000

c. Form VAT-36 has to be obtained from the Department by making an application in Form VAT-36A by paying a fee of one rupee for each form

d. A register of Form 36A has to be maintained in Form VAT – 36B. A copy of the register in Form VAT-36B has to be submitted to the Department at the time of making application for forms

e. The transporter (railways, air, sea, and courier) will not carry any Form VAT-36 with him.

f. The goods will be brought into the State by the transporter and will remain in his custody

g. After the goods have arrived, the dealer will fill all three parts of Form VAT-36 depicting the details of import.

h. The original and duplicate part of Form VAT-36 will have to be submitted to the Department.

i. The Department will stamp both the parts, retain the original and hand over the duplicate to the dealer.

j. The dealer will then collect the goods from the transporter on the basis of duplicate part of Form VAT-36

The dealer has to preserve both the copies of Form VAT-36 (duplicate and triplicate) as it will have to be produced at the time of assessment

17. Procedure for sending goods outside the State (Rule 65):

By Road:

a. Any goods going outside the State of Punjab have to be accompanied by a declaration in Form VAT-36.

b. Form VAT-36 need not accompany the goods if the value of the goods does not exceed Rs.10,000

c. Form VAT-36 has to be obtained from the Department by making an application in Form VAT-36A by paying a fee of one rupee for each form

d. A register of Form 36A has to be maintained in Form VAT – 36B. A copy of the register in Form VAT-36B has to be submitted to the Department at the time of making application for forms

e. The dealer has to fill all the three copies of the Form VAT -36.

f. The original and duplicate part of Form VAT-36 has to be given to the transporter who will be carrying the goods outside the State.

g. The triplicate part of Form VAT-36 has to be retained by the dealer

h. At the first Information Collection Centre (ICC) before his exit from the State, the transporter has to produce the above counterfoils to the ICC.

i. The ICC shall stamp both the copies of Form VAT-36, keep the original with him and return the duplicate part of Form VAT-36 to the transporter

j. The transporter will carry the duplicate part of Form VAT-36 with the goods and submit the same to the consignee along-with the goods.

k. The dealer has to preserve the third copy of Form VAT-36 as it will have to be produced at the time of assessment.

By Rail, Air, Sea, Post or Courier:

a. Any goods going outside the State of Punjab have to be accompanied by a declaration in Form VAT-36.

b. Form VAT-36 need not accompany the goods if the value of the goods is below Rs.10,000

c. Form VAT-36 has to be obtained from the Department by making an application in Form VAT-36A by paying a fee of one rupee for each form

d. A register of Form 36A has to be maintained in Form VAT – 36B. A copy of the register in Form VAT-36B has to be submitted to the Department at the time of making application for forms

l. The dealer has to fill all the three copies of the Form VAT -36.

m. The original and the duplicate part have to be submitted to the Department.

n. The Department will stamp both the copies, retain the original and return the duplicate part

o. The duplicate part of Form VAT-36 has to be given to the transporter who will be carrying the goods outside the State.

p. The triplicate part of Form VAT-36 has to be retained by the dealer

e. The dealer has to preserve the third copy of Form VAT-36 as it will have to be produced at the time of assessment.