Value-added tax 1. Concept of indirect tax 2. What is VAT 3. Concept of supply 4. Concept of taxable amount (tax-base) VAT examples Bhava Nath Dahal 2 3 4 5 6 7 8 9 10 Example of VAT collection Registered person recovers VAT on its supply of goods and services 1. Tax invoice Abbreviated tax invoice Tax invoice 2. Supplier name 7. Goods or service 3. Regd. No. 4. Invoice no. 5. Buyer 6. Buyer PAN 8. Qty, Rate, Amt. 9. Discount 10. Taxable amt. 11. VAT 12.13% 13. Date Example of VAT collection Registered person recovers VAT on its supply of goods and services 1. Tax invoice Abbreviated tax invoice Tax invoice 2. Supplier name 7. Goods or service 3. Regd. No. 4. Invoice no. 5. Buyer 6. Buyer PAN 8. Qty, Rate, Amt. 9. Discount 10. Taxable amt. 11. VAT 12.13% 13. Date VAT 13% Supply Cash-discount Credit Payment Payment Bad-debt Bankrupcy No-consideration Waiver 13 VAT attractive points Recovery by taxpayer WH? Each option, each points Payment to State Recovery by State VAT attractive points Supply of goods or services in Nepal Supply (of Goods or Services) in Nepal– 1. Sale or purchase (delivery of Goods or Services) within territory of Nepal 2. Import (of Goods or Services) into Nepal 3. Export (of Goods or Services) from Nepal Supply is: 1. Sales (of Goods or Services) 2. Transfer (of Goods or Services) 3. Exchange (of Goods or Services) तपाईं हामीलाई झुक्याउने साना शव्द र साना कु रा हुन है! Sale or purchase (of Goods or Services) within territory of Nepal Registered person recovers VAT from the buyer at the Single rate of 13% of Taxable-amount of Supply of Goods or Services within Nepal Registered Person Unregistered Person Sale or purchase (of Goods or Services) within territory of Nepal Registered person Types of registration: three types 1. Compulsory registration 2. Voluntary registration 3. Temporary registration Whatever type of registration, once registered is Registered person unless Deregistration Compulsory registration threshold 1. Goods supply – Turnover (higher of sale or purchase of VAT-attractive goods) more than Rs.50 lakh in last 12-months 2. Service supply – Turnover more than Rs.20 lakh in last 12-months 3. Goods and Service both supply – Turnover more than Rs.20 lakh in last 12months 4. Business Import more than Rs.10,000 at a time. Turnover for the purpose of threshold Last 12-months Higher of sale or purchase of VAT attractive goods Example day: 2078 Ashadh 22 Last-month end on Nepali calendar: 2078 Jeth 31 Last 12- months: 2077 Ashadh 1 – 2078 Jeth 31 VAT-attractive VAT-exempt Total Sales 40 Lakh 40 Lakh 80 Lakh Purchase 55 Lakh 30 Lakh 85 Lakh Turnover Sale or purchase (of Goods or Services) within territory of Nepal How to register 1. Application by taxpayer to Tax-officer 2. Verification of documents by Tax-officer 3. Registration decision and issuance of Registration certificate When to apply for registration 1. Compulsory registration – within 30-days from the date of threshold 2. Voluntary – as when opt by taxpayer 3. Temporary – case to case conditional Example day: 2078 Ashadh 22 Threshold day: 2078 Jeth 31 Application deadline: 2078 Ashadh 30 Decision deadline: 2078 Srawan 29 Recovery of VAT on Supply of Goods or Services Goods: All the tangible items of supply Services: All the items of supply other than goods Goods: 1. Trading goods 2. Land, building, towers, road 3. Furniture, machinery, plant (new or used) 4. Pen, pen-cap, ink, 5. kabad, read-papers, used cloth What after registration? •Display (by both registered person and un-registered person) • Display of registration certificate, tax officer certified copies in each branch and commercial departments. • Display of tax-plate including each branch and commercial departments. •Issuing tax invoice •Recovery of VAT •VAT Accounting and records •VAT Reporting/self-assessment •VAT payment Recovery of VAT on Supply of Goods or Services: Taxable-amount Registered Person recovers VAT at single rate of 13% of Taxable –amount of Supply of Goods or Services in Nepal. Supply: 1. Sales – consideration of cash or cash equivalent (CBD, COD, Credit) 2. Exchange – consideration other than cash or cash equivalent 3. Transfer – no-consideration Market price is the tax-base (with few exceptions) Recovery of VAT on Supply of Goods or Services: Taxable-amount Market price Rs.80 Discount - none Example E1: AB company sales 300 Kg of sugar at Rs. 80 per Kg. Tax-invoice SN Particulars Quantity Rate 1 300 Kg Sugar [Name, specification, dimension, model, batch, standard or whatever information that links the items of supply] Sub-total Less: Trade-discount [discount, less, concession, commission, trade-discount or whatever named that reducing the total amount of price] Rs. 80/kg Amount Rs. 24,000 24,000 0 Taxable-amount 24,000 Add: VAT @ 13% 3,120 Total 27,120 Recovery of VAT on Supply of Goods or Services: Taxable-amount E-2: AC company sales 300 Kg of sugar at Rs. 80 per Kg. If purchase is more than 200 Kg, quantity discount will be 5% of purchase. Tax-invoice SN 1 Particulars Sugar Less: Quantity discount [whatever named] Quantity Rate Discount – qty 5% Amount Rs. 315 - 15 300 Sub-total Less: Trade-discount Taxable-amount Add: VAT @ 13% Total Market price Rs.80 80 24,000.00 24,000.00 24,000.00 3,120.00 27,120.00 Recovery of VAT on Supply of Goods or Services: Taxable-amount E-2: AC company sales 300 Kg of sugar at Rs. 80 per Kg. If purchase is more than 200 Kg, quantity discount will be 5% of purchase. Tax-invoice SN 1 Particulars Sugar Less: Quantity discount [whatever named] Quantity Rate Discount – qty 5% Amount Rs. 315 - 15 300 Sub-total Less: Trade-discount Taxable-amount Add: VAT @ 13% Total Market price Rs.80 80 24,000.00 24,000.00 24,000.00 3,120.00 27,120.00 Recovery of VAT on Supply of Goods or Services: Taxable-amount E-2: AC company sales 300 Kg of sugar at Rs. 80 per Kg. If purchase is more than 200 Kg, quantity discount will be 5% of purchase. Tax-invoice SN 1 Particulars Sugar Less: Quantity discount [whatever named] Quantity Rate Discount – qty 5% Amount Rs. 315 - 15 300 Sub-total Less: Trade-discount Taxable-amount Add: VAT @ 13% Total Market price Rs.80 80 24,000.00 24,000.00 24,000.00 3,120.00 27,120.00 Recovery of VAT on Supply of Goods or Services: Taxable-amount E -3: AD company sales 300 Kg of sugar at Rs. 80 per Kg. If purchase is more than 200 Kg, quantity discount will be 5% of purchase. Transportation cost agreed Rs.1,000. SN Particulars Tax-invoice Quantity 1 Sugar Quantity All benefits Less: (- 15 kg) discount All burden (cost to the buyer) is transportation (+1000) 2 Transportation Sub-total Less: Trade-discount Taxable-amount Add: VAT @ 13% Total Rate 315 -15 300 Discount – qty 5% Amount Rs. 80 LS Market price Rs.80 24,000.00 1,000.00 25,000.00 25,000.00 3,250.00 28,250.00 Recovery of VAT on Supply of Goods or Services: Taxable-amount E -4: AE company sales 300 Kg of sugar at Rs. 80 per Kg. If purchase is more than 200 Kg, quantity discount will be 5% of purchase. Buyer obtains 5% reputation and recurring bonus on the price. Transportation cost agreed Rs.1,000. SN 1 2 Particulars Sugar Less: Quantity discount Tax-invoice Quantity Rate 315 -15 300 LS Transportation Sub-total Less: Trade-discount [reputation & recurring bonus at 5% of Rs.24,000] Taxable-amount Add: VAT @ 13% Total Amount Rs. 80 24,000.00 1,000.00 25,000.00 1,200.00 23,800.00 3,094.00 26,894.00 Recovery of VAT on Supply of Goods or Services: Taxable-amount E-5: AF company transfers 300 Kg of sugar having market price of Rs. 80 per Kg to its subsidiary. Subsidiary will pay transportation cost of Rs.1,000. Transfer is supply Tax-invoice SN Particulars 1 Sugar [transfer to subsidiary] Transportation by the subsidiary itself Sub-total Less: Trade-discount Taxable-amount Add: VAT @ 13% Total Quantity 300 Kg Rate Amount Rs. Rs. 80/kg 24,000 24,000 0 24,000 3,120 27,120 Taxable-amount: effect of taxes E - 6: AG company transfers 300 Kg of Molasses having market price of Rs. 80 per Kg to its subsidiary. Excise duty rate is 5%. Subsidiary will pay transportation cost of Rs.1,000. Tax-invoice SN Particulars 1 Molasses 2 Excise-duty @5% Sub-total Less: Trade-discount Quantity Rate 30080 Amount Rs. 24,000.00 1,200.00 25,200.00 - Taxable-amount 25,200.00 Add: VAT @ 13% 3,276.00 Total भाङ्ग पेल धतुरो पेल 28,476.00 खै ले मेरो तीन पाथी तेल Taxable-amount: non-trading goods E - 7: AH Co. delivers paper-waste at Rs. 5,000 a month and plasticwaste Rs.3,000 a month. AH Co. SN 1 2 Tax-invoice Buyer’s name: Waste-collector Buyer’s PAN: Particulars Quantity Rate Amount Rs. Paper-waste LS 5,000 Plastic-waste LS 3,000 Sub-total 8,000 Less: Trade-discount Taxable-amount 8,000 Add: VAT @ 13% 1,040 Total 9,040 भाङ्ग पेल धतुरो पेल खै ले मेरो तीन पाथी तेल Recovery of VAT Registered person recovers VAT on its supply of goods and services 1. Tax invoice Abbreviated tax invoice Tax invoice 2. Supplier name 7. Goods or service 3. Regd. No. 4. Invoice no. 5. Buyer 6. Buyer PAN 8. Qty, Rate, Amt. 9. Discount 10. Taxable amt. 11. VAT 12.13% 13. Date Recovery of VAT on Supply of Goods or Services: Taxable-amount Items as example Quantity Rate (mkt.) Amount Rs. E8:Goods (specification, dimension, size, type, brand, model Units no.)/ Service (details) Less: qty dis. Supply-associated services: Certifications Lab. test Packaging Transportation Other (self or 3rd party's) Supply-associated taxes: Excise-duty Other duties (Federal, provincial or local) Sub-total Less: trade-discount Taxable-amount VAT @ 13% Total (say 10%) 2100 (100) 2000 Rs.100 200,000 1,000 2,000 1,000 10,000 1,000 1,000 2,000 1,000 10,000 1,000 2,000 5,000 220,000 20,000 200,000 26,000 226,000 Taxable-amount: Barter/exchange simple issue E - 9: AJ Furniture exchanged 15 units of chair with BJ’s 20 Chinese chairs. Regular selling price to other buyers is Rs. 4000 and Rs.3000 respectively. BJ AJ Furniture Tax-invoice Buyer’s name: BJ Buyer’s PAN: - Tax-invoice Buyer’s name: AJ Furniture Buyer’s PAN: - Qty. Rate Amount Rs. SN Particulars Qty. Rate Amount Rs. SNParticulars Chairs Chairs 1 In exchange with 20 3000 60,000 In exchange with 1 15 4000 60,000 AJ’s 15 chairs BJ’s Chinese 20 Sub-total 60,000 chairs Less: Trade-discount Sub-total 60,000 Taxable-amount 60,000 Less: Trade-discount Add: VAT @ 13% 7,800 Taxable-amount 60,000 Total 67,800 Add: VAT @ 13% 7,800 Total 67,800 Taxable-amount: Partial consideration E - 10: AK Furniture sold 15 units of chairs to BK’s personal use. Regular selling price to other buyers is Rs. 4000, however supplies to BK was at Rs.1,000 each. AK Furniture Tax-invoice Buyer’s name: BK Buyer’s PAN: - SN Particulars 1 Chairs Sub-total Less: Trade-discount Qty. Rate Amount Rs. 15 4000 60,000 60,000 - Taxable-amount 60,000 Add: VAT @ 13% 7,800 Total 67,800 VAT 13% Supply Cash-discount Credit Payment Payment Bad-debt Bankrupcy No-consideration Waiver 36 Taxable-amount: Other than market price – Wood Sec. 12A Log wood (Sec.12A) – Higher of selling price or governmental royalty Sold to member of community forest – no VAT Personal use of own wood – no VAT =====No-tax invoice, just collection and deposit Example-11 Seller type Remarks Selling price National forest Sales, auction, Royalty (provincial government) transfer or other Community forest way of transfer to Taxable-amt VAT@13% 3rd party Private forest Total Recoverable i 400,000 500,000 500,000 65,000 Ii 500,000 500,000 500,000 65,000 iii 600,000 500,000 600,000 78,000 565,000 565,000 678,000 465,000 565,000 678,000 Taxable-amount: Other than market price – Notified/price-published items Notified goods sold to person other than in supply-chain - Sec.14(6) Notified goods : The goods notified under Sec. 14(6) by Director General of Inland Revenue Department for publication of selling price [mainly negative-externalities as controlled items]. Currently - Liquor, cigarette and recharge chard for mobile are notified goods. Notified goods cannot be sold without publishing the price. Self-rate published item: Goods on which Producer publishes the price. The impact is as similar as Notified goods. •If factory sells to registered person, selling price will be Rs. 20,000. Ex-factory price Rs. 20,000 Distributor's price Rs. 20,400 •If factory sells to unregistered person, selling price for the VAT purpose will be Rs. Whole-seller's price Rs. 21,000 22,000 as taxable value. Retail price/consumer price Rs. 22,000 •If whole-seller sells to unregistered person, selling price for the VAT purpose ‘to registered person in the will be Rs. 22,000 as taxable value. supply-chain’ Taxable-amount: Notified goods Irrespective of position of supplier in Supply-chain (producer, distributor, whole-seller, retailer): E-12 Lamsal Ltd. is registered person selling liquor. Rana Ltd. produces and sells liquor at The Taxable-amount will be same. the above published selling price. The pricing for VAT purpose will be Rs. 22,000. Consumer level Tax Invoice Particulars Qty. Rate Amount Rs. Liquor 1 cartoon Rs. 22,000 Rs. 22,000 Taxable amount Rs. 22,000 Add: VAT @ 13% Rs. 2,860 Total Rs. 24,860 Less: discount Rs. 2,000 Net amount Rs. 22,860 Timing of supply – Sec. 6 E-13 AA Ltd. Date of agreement: 2077/12/6 Date of Purchase order: 2078/1/15 Date of delivery: 2078/3/27 Date of billing: 2078/3/28 Date of payment: 2078/5/4 Earliest date: ? What is delivery? EXW (handed over in the shop or in warehouse) CIP (handed over to the first carrier) DDP (handed over to the agreed place of buyer) What is Consideration? Consideration Vs. Advance payment CBD/on-account pmt. Vs. advance/mobilization Supply: 1. Sale, Exchange or transfer 2. Agreement for sales, exchange or transfer 3. Permission for sales, exchange or transfer ? Earliest date: 2078/3/27 Timing ofSupply Supply: Timing of (sales real-?, agreement -?, or Permission-?) Earliest of: Earliest of: 1. Invoicing timing 1. Delivery Invoicing timing (?) (including 2. timing or (?) instalment due) 2. milestone Delivery timing 3. timing 3. Consideration Consideration timing (?) Timing of supply – Sec. 6 (Taxable-amt.) E-14 BB Ltd. entered into an agreement on 2078 Ashadh 28 for sale of 14,000 chairs to National conference hall at Rs. 5,000 each. The factory is shutting down since Ashadh 15 due to flood in labors’ village. Transportation of raw material has stopped due to land-sliding since Ashdh 21. 1. Due to payment before budget yearend, National conference pays Rs. 1 Crore in 2078 Ashadh 31. 2. Company delivers 2,000 chairs from its stock on 2078 Srawan 5. 3. Co. delivers 6,000 chairs on 2078 Bhadra 28. 4. Co. delivers 4,000 chairs on 2078 Mansir 20 and deal terminated. Supply: 1. Supply: Agreement for sales: 2078/3/28 (nothing having value) 1. Sale, Exchange or transfer 2. 2078/3/31 – Consideration-first for 2.Rs.1 Agreement sales, as Crore – notfor mentioned exchange or transfer advance, so supply of Rs.88,49,558 + Rs.11,50,442. 3.VAT Permission for sales, exchange or transfer 3. 2078/4/5 – delivery-first ? 3. 2078/4/5 – delivery-first 2,000*Rs.5,000-Rs. 88,49,558 Timing ofSupply Supply: Timing of (sales real-?, = Rs.11,50,442 VAT 149,558 = 13,00,000 agreement -?, or Permission-?) Earliest of: 4. 2078/5/28 – delivery-first Earliest of: 1. Invoicing timing 6000*Rs.5000= 3,00,00,000 + 39,00,000 1. Invoicing timing (?) 2. Delivery timing (including 5. 2078/8/20 – delivery-first or (?) instalment due) 2. milestone Delivery timing 4,000*Rs.5,000 = 2,00,00,000 VAT 26,00,000 3. timing 3. Consideration Consideration timing (?) Timing of supply – Sec. 6 (Taxable-amt.) Supply: E-15 CC Ltd. entered into an agreement 1. Agreement for exchange: 2078/1/28 (nothing having value) on 2078 Baisakh 28 for exchange of 10 chairs (price Rs. 10,000 each) with DD 2. Case (i), is similar to Example – 9 Furniture- 5 modern tables (price Rs. 3. Case (ii), for CC- delivery-first Rs. 20,000 each). 100,000 and consideration-first for DD Cases to be addressed: 4. Case (iii), for DD – delivery-first Rs. i. Both parties deliver all agreed items 100,000 and consideration-first for CC. on 2078/3/28. ii. CC Ltd. handed over chairs on 4. Case (iv), For DD – delivery-first for 2078/3/28. Rs.40,000 and Consideration-first for iii. DD Furniture handed over tables on CC on 2078/3/28. 2078/3/28. 5. Case (v), For CC – delivery-first for iv. DD Furniture handed over 2 tables Rs.10,000 and consideration-first for DD. on 2078/3/28. v. CC Ltd. handed over 1 chair on 2078/3/28 Practically possible? Timing of supply – Exceptions (Taxable-amt.) Telecom operator invoicing/payment – date Telecom operator (not business) 1. Pre-paid 2. Post-paid of 3. PSTN 4. Digital payment 5. Inter-operator 6. Other Installment payment/Milestone payment: Earliest of: i. Date of payment of installment or ii. Due date of installment. Instalment/milestone 1. Instalment – due date and payment date 2. Milestone – concept of milestone Taxable-amount– Used-goods What is used-goods? Who is used-goods dealer? What are VAT accountings? How much is taxable-amount? Taxable-amount– Used-goods What is used-goods? Who is used-goods dealer? What are VAT accountings? How much is taxable-amount? Taxable-amount– Used-goods PurchaseSelling at loss? Used-goods Taxable amount = Selling priceon before VAT – cost VAT purchase Taxable amount is ZERO inclusive of VAT Ex-16 Rs.80,000 Ex- 17 80,000 Ex- 18 80,000 Ex-19 80,000 Rs.10,400 10,400 0 10,400 Repair cost Rs.10,000 10,000 10,000 10,000 VAT on repair Rs.1,300 1,300 1,300 300 Selling Price Rs.120,000 100,000 100,000 100,000 Rs.18,300 0 8,700 0 Taxable Amount VAT@13% Rs.120,000 – (80,000+10,400+10,000+1,300) Rs.120,000 – 101,700 46 Taxable amount – Foreign currency Three-points theory of Foreign currency transactions in tax-accounting 1. Transaction date 2. Forex source always NRB 3. Selling or buying rate: a. Receiving FC - buying Rate b. Paying FC – selling rate Taxable amount – Foreign currency Ex-20 Chaubagain Ltd. sold goods worth US$ 50,000 to a foreign contractor working in Nepal. Forex rate: Forex Rate On date of supply: On date of payment of US$ 20,000: On the date of full settlement: NRB Rate Rs. 120.00 118.12 119.10 According to Rule 21, invoice issued on foreign currency needs to converted into NPR taking foreign exchange rate of Nepal Rastra Bank. In this case, Taxable amount is Rs.120×50,000 = Rs. 6000,000 1. Date is: date of supply 2. Forex source is: NRB 3. Selling or buying is: Buying Rate Own Bank Rate Rs. 119.72 118.06 119.30 Three-points theory of Foreign currency transactions in tax-accounting 1. Transaction date 2. Forex source always NRB 3. Selling or buying rate: a. Receiving FC - buying Rate b. Paying FC – selling rate Taxable amount – free items Ex-20 Seragain Ltd., acquiring price Rs. 300 per unit and selling price Rs. 360 per unit: a. Receives 2,000 units free goods and delivers free to whole-sellers b. Receives 2,000 units of free goods and sold them c. Permits quantity discount of 2,000 units d. Permits complementary of 2,000 units. Gift/complementary/quantity -discount/model/free-goods or similar 1. Free receiving and free gifting 2. Free receiving but regular sales 3. Purchased/manufactured and free gifting Rule 24: 1. Free receiving and free gifting – recording of the stock details 2. Stock records 3. Stock records and definedscheme of free Taxable amount – free items Ex-21 Aapagain Ltd. gifts its equipment costing Rs. 15 Crores and having market price Rs. 6 Crores to Nepal Army Construction Division. What shall be the tax impact. [Income tax? Value added tax?] Gift/complementary/quantity -discount/model/free-goods or similar 1. Free receiving and free gifting 2. Free receiving but regular sales 3. Purchased/manufactured and free gifting Rule 24: 1. Free receiving and free gifting – recording of the stock details 2. Stock records 3. Stock records and definedscheme of free Abbreviated tax invoice Taxable-amount: VAT inclusive price 1. Retailer obtains permission from tax-officer for ‘Abbreviated tax invoice’ – Rule 18. 2. Consumer-centric business (Rule- 14B): menu price – Exhibition, sales-outlet, hotel-restaurant, show-room – tag-price, menu-price, shelve-price Tax invoice Abbreviated Consumer price Forex price Taxable amount – import of goods Transaction Value concept (TV-concept) नेपाल बाहिरको एक पैसा छु ट् न नहुने नेपालहित्रको एक पैसा पनन नहुने (unloaded 1. Transaction value for Customs duty (non-territorial cost in NPR): at terminal) a. Cost paid or payable to foreign vendor: b. Transit cost – international transportation c. Transit cost – international insurance d. Transit cost – other cost till the customs frontier 2. Customs duty – the first duty on TV 3. Excise duty, pollution duty, road maintenance duty or other duty on (TV + Customs duty) 4. Taxable amount for VAT (TV + customs duty + other duties) 5. VAT @ 13%. INCOTERMs ठूलो सामान जापानबाट हकन्नु छ हिरगञ्ज ल्याइदे िन्नुस् (DAT), गोदामै पुगरे हलनोस् (EXW), अहिसको गोदामै ल्याइदे िन्नुस् तर िन्सार हतनुनस् (CIP) पोटन सम्म ल्याइदे िन्नुस (FAS) जिाजसम्म ल्याइदे िन्नुस (FOB), कलकत्ता ल्याइदे िन्नुस् (CIF), िन्सार पहन उसैलाई हतदे िन्नुस् (DDP) CIP, 2020 to Shankhamul, Kathmandu, Nepal Taxable amount on import of goods Cost paid or payable to foreign vendor USD 20,000×120 [FC ×NRB selling rate of forex on the date declaration] Transit cost [same conversion rule] a. International transportation b. International insurance c. Other cost till the customs frontier d. Transaction Value for customs duty purpose Customs duty (30%) Excise duty (10%) Other duty Taxable-amount for VAT VAT @ 13% Rs.2400,000 Rs.300,000 Rs.200,000 Rs.100,000 Rs.3,000,000 Rs.900,000 Rs.3900,000 Rs.390,000 Rs.210,000 Rs.45,00,000 Rs.585,000 VAT on import of goods As declared Cost paid or payable to foreign vendor [FC ×NRB selling rate of forex on the date declaration] Transit cost [same conversion rule] a. International transportation b. International insurance c. Other cost till the customs frontier d. Transaction Value for customs duty purpose US$40,000×120 $50,000×120 Rs.4800,000 Rs.6,000,000 Rs.300,000 Rs.200,000 Rs.100,000 Rs.5,300,000 Rs.300,000 Rs.200,000 Rs.100,000 Rs.6,500,000 Customs duty (20%) Modified rate will be the basis for all taxes and duties Excise duty (10%) Other duty Taxable-amount for VAT VAT @ 13% As modified Rs.1300,000 Rs.7800,000 Rs.780,000 Rs.220,000 Rs.88,00,00 Rs.1,144,000 Taxable amount on import of service – Sec. 8(2) Cost paid or payable to foreign vendor USD 20,000 Reverse-charging date is earliest of: a. Service (or milestone) completion date b. Payment date Taxable-amount USD 20,000×120 [FC ×NRB selling rate of forex on the reverse-charging date] VAT at 13% Rs.2400,000 Rs. 312,000 Reverse-charging system of VAT Reverse-charging system of VAT Payment of VAT on purchase by the buyer directly to the tax-officer is reverseBuyer charging system of VAT. In two (or three) cases, buyer requires to pay VAT at 13% of taxable-amount directly to the tax-officer under reverse-charging system of VAT are: a. Importation of service – Sec. 8(2) Importation of service b. Business construction using VAT-unpaid invoices – Sec. 8(3) – Sec. 8(2) Business construction using VAT-unpaid invoices – Sec. 8(3) Supplier Reverse-charging system of VAT Tax-officer Taxable amount on Business construction – Sec. 8(3) • Business construction – building, factory, road, dam, stadium, shed etc. • ‘Total construction cost’ more than Rs. 50 lakh • Taxable-amount is VAT unpaid cost excluding interest during construction and legal cost. • Example: • Total construction cost Rs. 70,00,000 Less: 1. VAT paid cost 40,00,000 2. Municipal legal cost 200,000 3. Interest during construction 300,000 Taxable-amount VAT under Reverse-charging system 2500,000 Rs. 325,000 Payable monthly Computation monthly Debit Note Credit Note Instrument = Document (Formal) Instrument issued by a person debiting to another person without any payment is Debit Note. Similarly, the instrument issued by a party crediting another party of the transaction without any payment is Credit Note. Reversal of issued tax-invoice Invoice ref. Debit or Credit Note will be used in the case of any adjustment of issued tax-invoice: Invoice ref. Goods return Price renegotiation Invoice ref. Correction of mistakes in the issued tax-invoice Invoice ref. Summary Types of taxable – amount Tax invoice Abbreviated Consumer price Forex price 1. Sales – regular, quantity discount, trade discount, supplyassociated burdens, supply-associated taxes and duties 2. Transfer – no-consideration 3. Partial consideration 4. Exchange – regular, one-sided, odd-value Timing of supply 5. Wood, Notified-goods, price-published goods 1. Earliest rule 6. Used-goods 2. Instalment, milestone 7. Foreign currency supplies 3. Telecom special 8. Free – items 4. Exchange special 9. Non-delivery taxable-amount- Consideration only, Invoice only 5. Notified-goods 10. Import of goods and services 11. Business construction more than Rs. 50 lakh VAT Records – We learnt 1. Tax invoice: Regular invoice, abbreviated tax invoice, foreign currency tax invoice, consumer level tax invoice, insurance tax invoice (#6 nos.) 2. Debit note or credit note (#2 nos.) 3. Stock ledger on (#3 nos.): a. Sales, transfer, exchange b. Used-goods record c. Free goods stock record 4. Books (#3 nos.) a. VAT sales book b. Credit note book c. Debit note book 5. Reverse-charging records (#2) 1. 2. 3. 4. 5. Tax invoice (#6) Notes (#2) Stock ledger (#3) Books (#3) Reverse-charging (#2) ===== (#16) 1. Tax-plate 2. Registration certificate