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VAT Journal
Usage in BUSY
VAT Reports
Broadly speaking, VAT reports can be classified in 2 categories:
 VAT Registers
 VAT Summary/Computation/Returns
VAT Registers
VAT Registers are list of Sales/Purchase vouchers presented in the format prescribed
by the state government.
VAT Summary/Computation/Returns

VAT Computation calculates the Nett VAT payable/refundable for a specified
period and shows all the computation used to derive the final figure.

VAT Summary is almost same as VAT Computation except it also shows the
details of Central Sales & Purchases, which is not connected with the
calculation of VAT.

VAT Return is basically VAT Summary only, printed in the format prescribed
by the state government. So VAT Returns are different for different states,
but all provides the same details.
Need for VAT Journal
BUSY
tracks
VAT
related
information
(Input
VAT/Output
VAT)
in
Sales/Purchase/Sales Return/Purchase Return vouchers only. Since VAT Registers
are based on Sales/Purchase/Sales Return/Purchase Return vouchers only, they can
be printed easily. But other reports (VAT Computation/Summary/Returns) may have
additional information. These reports are not complete without that additional
information.
Here VAT Journal comes into the picture. VAT Journal is a voucher that helps you
enter the details of special transactions where VAT is affected. These details are not
connected with Sales/Purchase/Sales Return/Purchase Return vouchers.
Let us understand with the help of an example. If we have a debit note where VAT is
calculated then in the VAT Summary Report this amount is not reflected. The reason
is that the VAT Summary report takes into account only the sales/purchase and
sales/purchase return transactions. For other transactions we have to enter the
details separately.
The details are entered with the help of VAT Journal. Once we have entered the
special transactions in the VAT Journal then the VAT Summary report is
automatically updated with these details.
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VAT Journal allows us to increase or decrease the Input Tax amount as well as the
Output Tax amount. Input Tax amount represents the amount paid on our purchases
while Output Tax amount represents the tax amount charged on our sales. The
difference between Input Tax and Output Tax is Nett VAT payable/refundable. If
Output Tax is more than Input Tax, then Nett VAT is payable otherwise Nett VAT is
refundable.
Separation of VAT Journal and Accounting records
An important point to keep in mind is that the details entered in the VAT Journal
have no bearing on the accounting records.
Let us understand with the help of an example. We have entered the debit note
details in the VAT Journal and the VAT Summary Report is updated with this
information automatically. Now if we want to reflect this debit note in the accounting
books then we have to enter the Debit note voucher separately. This is because the
details that are entered in the VAT Journal are only for the purpose of VAT return. It
has no relation or effect on the accounting aspect of the business.
Given here is a screenshot of the VAT Journal voucher.
Special Cases for VAT Journal
Given here is a table of the special case scenarios where a VAT Journal voucher has to be
entered.
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Nature of
Adjustment
Opening
Balance
brought
forward
Effect (with examples)
Suppose in month of April Rs. 20,000 are claimable from the
government but only Rs. 10,000 was claimed and refunded by the
government. Now the balance Rs. 10,000 remains claimable in the
month of April. The closing balance of the previous return period
(previous month of April) does not get carried forward in the next
return period (next month of May) automatically. It has to be
entered manually in VAT Journal in order to reflect the value in VAT
Returns & reports.
In such a case, a VAT Journal voucher will be entered wherein the
VAT amount to be claimed will be mentioned under head ’Opening
Balance B/F ‘ in the ‘Nature’ drop-down list.
On account of
Capital
Purchases
Machinery worth Rs. 50,000 @ 4% VAT has been purchased for
business purpose. Now VAT Paid on capital purchase (machinery)
can be claimed from the government. According to government,
the VAT paid on capital purchase can be claimed in installments.
In such a case a VAT Journal voucher will be entered wherein the
VAT amount to be claimed will be mentioned under the head ‘On
A/c of Capital Purchases’ in the ‘Nature’ drop-down list.
Tax Claimed
on old stock
(Non-VAT
compliant)
Tax amounting to Rs. 15,000 has been paid in the previous years
on purchases when VAT was not applicable. Now VAT can be
claimed in such cases.
In such cases a VAT Journal voucher will be entered wherein the
VAT amount to be claimed will be mentioned under head ‘Tax
Claimed on Old Stock’ in the ‘Nature’ drop-down list.
On account of
change in price
A mobile dealer sold Nokia cell phones on 1/6/05 for Rs. 5,000 and
charged VAT accordingly. He later realized that the actual price was
Rs. 6,000. The extra amount of VAT on Rs. 1,000 is to be deposited
with the government.
There are 2 methods to reflect this in the VAT Return. One method
is to modify the existing sale bill and reflect the change in VAT
amount accordingly. Since modification of an existing voucher is
not a good accounting practice, thus the dealer can opt for the
second method.
He can enter a debit note with the amount to be adjusted and enter
a VAT Journal voucher for the same.
In such a case a VAT Journal voucher will be entered wherein the
VAT amount to be paid will be mentioned under head ‘On A/c of
change in price’ in the ‘Nature’ drop-down list.
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Change in Sale
or Purchase
nature
ABC & Co. sold goods worth RS. 20,000 @4% VAT. After few days,
the company realized that the rate of VAT on the goods was
12.5%.
VAT to be deposited with the government is @ 12.5% rate.
In such a case there can be 2 methods to reflect the change. One
method is that the company modifies the sales invoice to reflect the
change and collects the extra VAT amount from the buyer. Since
modification of an existing voucher is not a good accounting
practice, thus the company can opt for the second method.
Moreover, the buyer can also refuse to pay the extra VAT amount.
In such a case, VAT @ 8.5% becomes a liability for ABC & Co.
The company can enter a VAT Journal voucher with the amount of
VAT @ 8.5% to be paid under the head ‘Change in Sale/Purchase
nature’ in the ‘Nature’ drop-down list.
Debit note
This case is similar to the on account of change in price.
ABC & Co. sold goods worth Rs. 6,000 and charged VAT
accordingly. The company later realized that the actual price was
Rs. 8,000. VAT on Rs. 2,000 is to be paid to the government. Let
us suppose that the company decides to collect Rs. 2000 plus VAT
from the buyer party. Since modification of the existing sales
invoice is not a good accounting practice the party will be debited
through a Debit Note.
To reflect the Debit Note in the VAT return, a VAT Journal voucher
will be entered wherein the VAT amount to be paid will be
mentioned under head ‘Dr. Notes Received/Issued’ in the ‘Nature’
drop-down list.
Credit note
This case is similar to the on account of change in price.
ABC & Co. purchased goods worth Rs. 6,000 and paid VAT
accordingly. The company later received a notification from the
seller that the actual price was Rs. 8,000. VAT on Rs. 2,000 is to be
paid to the seller. Let us suppose that the company decides to pay
Rs. 2000 plus VAT to the seller party.
Since modification of the existing purchase bill is not a good
accounting practice the party will be credited through a Credit
Note.
To reflect the Credit Note in the VAT return, a VAT Journal voucher
will be entered wherein the VAT amount to be claimed will be
mentioned under head ‘Cr. Notes Received/Issued’ in the ‘Nature’
drop-down list.
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On account of
stock transfer
ABC & Co. purchases goods worth RS. 20,000 @ 12.5 % VAT. After
few days, the company makes a stock transfer from its Delhi outlet
to Gurgaon outlet.
In case of stock transfer, the tax rate over and above 4% can be
claimed from the government
In such a case, the company will enter a VAT Journal voucher for
the input tax amount to be claimed under the head ‘On A/c of
Stock Transfer’ in the ‘Nature’ drop-down list.
On account of
exempt sale
Book World is a book-publishing firm. The firm purchased paper @
Rs.100/kg and paid VAT @12.5%. Now they publish a book using
that paper and sell in the market. Since books are exempted from
VAT hence no VAT is charged.
According to the government, if the finished products are exempted
from VAT then the firm cannot claim any tax credit paid on raw
material.
Thus, Book World cannot claim any VAT from the government. The
purchase voucher is already included in the VAT Summary report
thus we need to pass a VAT Journal voucher against the purchase
voucher to cancel the claim.
In such a case a VAT Journal voucher will be entered wherein the
VAT amount to be adjusted against the purchase voucher for paper
entered earlier will be mentioned under head ‘On A/c of Exempt
Sale’ in the ‘Nature’ drop-down list.
Sale and
Purchase
Cancellation
ABC & Co. sold goods worth Rs. 10,000 plus VAT on 1/7/05. Next
day the sale got cancelled and the goods were returned to ABC &
Co.
In such a case there can be 2 methods to reflect the cancellation.
One method is to enter a sale return voucher for the cancellation of
sale.
Second method is to enter a VAT Journal voucher against the sale
voucher entered earlier mentioning the amount of VAT to be
adjusted under the head ‘Sale/Purchase Cancellation’ in the
‘Nature’ drop-down list.
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Goods
damaged and
destroyed
Goods lying unsold with ABC & Co. worth Rs. 6,000 have been
damaged. VAT has been paid on these goods at the time of their
purchase.
The goods cannot be sold and thus no VAT can be collected from
the consumer. In such a case since VAT has been paid at the time
of their purchase thus the company needs to pass a VAT Journal
voucher against the purchase voucher to cancel the claim.
In such a case a VAT Journal voucher will be entered wherein the
VAT amount to be adjusted against the purchase voucher will be
mentioned under head ‘Goods Damaged /Destroyed’ in the ‘Nature’
drop-down list.
Penalties
ABC & Co. provided misleading information to the government. On
discovery of this discrepancy the government imposed a penalty on
them.
This penalty payment can be recorded as a VAT Journal voucher.
In such a case a VAT Journal voucher will be entered wherein the
penalty amount to be paid will be mentioned under head ‘Penalties’
in the ‘Nature’ drop-down list.
Interest
ABC & Co. delayed the payment of tax due to the government. Now
the company has to pay interest on the delayed tax amount.
This interest payment can be recorded as a VAT Journal voucher.
In such a case a VAT Journal voucher will be entered wherein the
interest amount to be paid will be mentioned under head ‘Interest’
in the ‘Nature’ drop-down list.
On account of
Bad Debts
ABC & Co. sold goods for Rs. 6,000@ 4% VAT (VAT = 240) on
credit to Ram. Now Ram is unable to pay the outstanding amount
and thus Rs. 6,000 are declared as bad debts. In such a case, ABC
& Co. will not pay output VAT to the government, since Ram did
not pay the amount.
In such a case a VAT Journal voucher will be entered wherein the
VAT amount to be adjusted will be mentioned under head “On A/c
of Bad Debts/Recovery”.
Moving on, Ram has decided to pay Rs. 3000 (VAT = 120) to ABC &
Co in the settlement of the debt. Thus ABC & Co. has to pay to the
government the VAT collected.
In such a case a VAT Journal voucher will be entered wherein the
VAT amount to be paid will be mentioned under ‘On A/c of Bad
Debts/Recovery’ in the ‘Nature’ drop-down list.
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