GOVERNMENT OF J&K
COMMERCIAL TAXES DEPARTMENT
Though the Value Added Tax (VAT) regime is a much
simple , transparent , trader and customer friendly
system of taxation but all the same it is very novel
too for the people, it is therefore, but natural that
the trading community in particular and the
consumers in general need answers to their queries
about this new tax regime. The Department of
Commercial Taxes, Government of J&K has
accordingly attempted answers to some of the
Frequently Asked Questions (FAQs) on VAT as below:
VALUE ADDED TAX (VAT) - FAQS.
Defining VAT
Q1. What is VAT?
A: VAT is the abbreviated form of Value Added Tax.
V = Value
A = Added
T = Tax
Each Commodity passes through several stages of production and
distribution. Value at the final stage is the sum of value
created/added at each of these stages. Under VAT value added at
each stage of production and distribution is taxed. VAT is essentially
a Multi-point System of taxation.
Q2. What is VALUE ADDED?
A: Value added is the difference between a dealer’s Sales and
Purchases.
Value Added = Value of Output - Value of Purchased Inputs.
Q3. Is VAT popular?
A: VAT is immensely popular throughout the world. VAT system is
presently in operation in more than 135 Countries and covers
nearly 85% of the World’s population.
Q4. Is VAT system in operation in our neighbouring
Countries?
A:
Yes. It is operational in . Pakistan, Bangladesh, Nepal, Srilanka
and China).
Q5.
Who Pays VAT ?
A:
Only dealers above the taxable limit have a tax liability under
VAT.
Q6.
What is the taxable limit in J&K?
A:
Under The Jammu and Kashmir Value Added Tax Act, 2005
taxable limit means in relation to a dealer who:
(a) Imports for sale or use in manufacturing
or processing any goods into the State
on his own behalf or on behalf of his
Principal
NIL
(b) manufactures or produces any goods
for sale or is engaged in any business
other than the business specified in (a) above
Rs.7.50 lacs
Q7. Who Registers under VAT?
A: All dealers above the taxable limit have to register under VAT.
Q8. What will the taxable limit include?
A:
The taxable limit includes gross turnover of sales or purchases.
Q9. What is included in the gross turnover to determine the
liability to pay tax?
A:
The turnover of all sales or purchases as the case may be shall
be taken, whether such sales or purchases are taxable or not
and the turnover shall include all sales or purchases as the case
may be, made by a dealer on his own account and also on
behalf of principals whether disclosed or not.
Q10. How does VAT work?
A: VAT works on the principle of Input Tax, Output Tax and Input
Tax Credit.
Q11. What is Input tax?
A: Tax paid by a Registered dealer to another Registered dealer for
goods purchased is the Input Tax.
Q12. What is Output Tax?
A: The tax charged by a Registered dealer for the sale of goods is
the Output Tax.
Q13. What is Input tax credit?
A: The set-off which a dealer gets for the taxes paid on purchases
made within the State is the Input Tax Credit.
Q14. What is the eligibility for Input Tax Credit?
A:
Facility of INPUT TAX CREDIT is available for tax paid on goods
purchased within J&K by a registered dealer having a TIN (Tax
Payer Identification Number) from another registered dealer
also having a TIN.
Q15. Are inter-state purchases eligible for Input Tax Credit ?
A:
No, Inter-State Purchases are not eligible for Input Tax Credit.
Q16. What is Net Tax payable under VAT?
A:
The net tax payable under VAT is:
Output Tax - Input Tax
Q17. How is VAT liability calculated?
A:
VAT liability is calculated by deducting Input Tax Credit from
Tax collected by a dealer during a tax period.
Q18. What is a tax period under the J&K VAT Act?
A:
The Tax period under The Jammu and Kashmir Value Added
Tax Act, 2005 is a quarter which means that the returns have
to be filed on a quarterly basis.
Q19: What happens to the excess Input Tax Credit ?
A:
If the Input Tax Credit of a Registered dealer exceeds the tax
collected during a tax period the excess Input Tax Credit will be
carried over to the next tax Period/s.
Q20: What about refund of excess Input Tax Credit ?
A:
The Input Tax Credit will be carried up to the end of the next
financial year beyond which the excess unadjusted Input Tax
Credit, if any, will be eligible for refund.
Q21. Which dealers are eligible for turnover tax registration ?
A:
Dealers who are neither MANUFACTURERS nor IMPORTERS
nor EXPORTERS and whose GROSS ANNUAL TUROVER OF
SALES is between Rupees 7.50 lacs and Rupees 20 lacs , have
the option to register for TURNOVER TAX and pay tax @ 1%
of their taxable turnover.
Q22. Can a dealer registered under turnover tax claim the
benefit of Input Tax Credit ?
A:
No, the facility of Input Tax Credit is not available to a dealer
registered under turnover tax.
Q23. Can a dealer registered under turnover tax issue a tax
invoice?
A:
No, a dealer registered under turnover tax can’t issue a tax
invoice.
Q24. When shall a VAT invoice be issued?
A:
A dealer having a TIN (Taxpayer Identification Number) when
selling goods to another dealer having a TIN shall issue a VAT
INVOICE.
Q25. When shall a retail invoice be issued?
A:
If a dealer having a TIN (Tax Payer Identification Number)
sells goods to a dealer who does not have a TIN or is
registered as a dealer under Turnover Tax or as a Casual
Trader or is an unregistered dealer or is a customer, the dealer
shall issue a RETAIL INVOICE.
Q26. On what kind of invoice is Input Tax Credit available?
A:
Input Tax Credit is available only on VAT invoice(original) and
no Input Tax Credit is available on a retail invoice.
Q27. Can a dealer registered under turnover tax charge tax
from the consumers?
A:
No, a dealer registered under turnover tax can’t charge any tax
from the consumers.
Q28. What is Voluntary registration ?
A:
Any dealer, whose gross turnover of sales during a year
exceeds Rs. one lac, may notwithstanding that he is not liable
to pay tax, apply for voluntary registration.
Q29. Is the mode of assessments different under VAT
system?
A:
Yes, there is a mechanism of self–assessment under VAT
whereby the dealers assess their own tax liability and pay the
tax due as per the returns filed by them on a quarterly basis.
Q30. Who gets the facility of self-assessment?
A:
The facility of self-assessment is available to all registered
dealers irrespective of their turnover.
Q31. Shall the department issue any notices for assessment?
A:
No, the department shall not issue any notices for assessment,
if the dealers file their returns in time and also pay the tax due
in time.
Q32. Will all the returns filed by dealers be picked up for
audit?
A:
No, a transparent criteria has been evolved under which a small
percentage of cases shall be picked up for tax audit/ audit
assessment.
Q33 When shall the department take action against a
dealer?
A:
The department shall take action only when there is compelling
evidence of tax evasion or tax avoidance against a dealer.
Q33. Is there any surcharge under VAT?
A:
No, there is no provision for surcharge under VAT.
Q34. How is VAT consumer friendly?
A:
Because of the mechanism of Input Tax Credit where the
dealer gets a set-off for the taxes paid earlier within the State,
such taxes are not treated as part of the cost thus there is no
CASCADING i.e,. Tax on Tax . This ensures that the price of
commodities does not increase under VAT .
Q35. Is it mandatory for a dealer having a TIN to issue a VAT
or a retail invoice?
A:
Yes, it is mandatory for all registered dealers having a TIN to
issue a VAT invoice/ a retail invoice, as the case may be .
Q36. What happens if a dealer having a TIN fails to issue a
VAT invoice or a retail invoice, as the case may be?
A:
If a dealer having a TIN fails to issue a VAT invoice or a retail
invoice, as the case may be, shall be liable to a penalty equal to
ten times of the tax payable on each such default or Rs. 10,000
whichever is higher.
Q37. What happens if a person purchases goods from a
dealer (having a TIN) without an invoice?
A:
If a person purchases goods from a dealer having a TIN
without an invoice, he shall be liable to penalty equal to double
the amount of tax leviable on such goods.
Q38. Is the depiction of price of commodity and component
of tax separately on the VAT/retail invoice mandatory?
A:
Yes, it is mandatory to depict the price of commodity and
component of tax separately on the VAT/retail invoice.
Q39. What are the different tax rate slabs under VAT?
A:
The tax rate slabs under VAT are:
0%, 1%, 4% and 12.5%
Q40. Which commodities have been kept out of VAT ?
A:
Aviation Turbine Fuel, Diesel, Liquor, Lottery tickets, Natural
Gas, Petrol and Resin have been kept outside VAT.
Q41. What is the status of services under VAT in J&K?
A:
The services have been kept outside the purview of VAT in J&K
and are taxed under The Jammu & Kashmir General Sales Tax
Act, 1962.
Q42. Is there a provision of tax deduction at source under
The Jammu and Kashmir Value Added Tax Act, 2005 ?
A:
No, The Jammu and Kashmir Value Added Tax Act, 2005 does
not have any provision for tax deduction at source and the
same continues to be governed under The Jammu & Kashmir
General Sales Tax Act, 1962 .
Q43. What is the benefit for exporters under VAT?
A:
If any goods are exported outside the territory of India, the
sales of such goods are ZERO RATED (which means that no tax
is charged on such sales and credit for Input Tax paid in the
State is allowable ) and the dealer is entitled to the refund of
the Input Tax paid in the State.
Q44. If I need a registration, in what Form VAT need I to
apply?
A:
Every dealer other than a Casual Trader liable to be registered
(including voluntary registration) shall submit an application in
Form VAT-01 to the Jurisdictional Registering Authority. The
application for registration by a casual trader shall , however
be, in Form VAT-02.
Q45. What is the period of validity of a dealer’s registration
certificate?
A:
Every certificate of registration other than the certificate of
registration of a Casual Trader is valid for a period of five years
from the date of issue and, in case of dealers already registered
under The Jammu & Kashmir General Sales Tax Act, 1962 the
validity of five years shall commence from the date a fresh
registration is granted to them. However in case of a Casual
Trader the certificate of registration shall be valid only for the
period as recorded in his certificate of registration.
Q46. Within what time period has a registered dealer to
apply to the Jurisdictional Registering Authority for
carrying out any amendment in his registration
certificate?
A:
The time period prescribed is 30 days.
Q47. Within what time period shall the Jurisdictional
Registering Authority amend the certificate of
registration ?
A:
It shall be done within 20 days of the receipt of the application
for amendment .
Q48. Is it mandatory for a registered dealer to display the
certificate of registration?
A:
Yes, it is mandatory on the part of every registered dealer to
display the certificate of registration at a prominent place at his
main place of business and certified copies are to be displayed
at the additional place of business, if any. If any registered
dealer fails to do so he shall be liable to a penalty of Rs.5,000.
Q49. What happens to a dealer who was required to get
himself registered but has failed to do so?
A:
A dealer who was required to get himself registered but has
failed to do so shall be liable to a penalty of Rs. 5,000 besides
the concerned Assessing Authority shall assess to the best of
his judgement the amount of tax due from the dealer.
Q50. What happens to a turnover tax dealer whose turnover
exceeds Rs. 20 lacs?
A:
As soon as the turnover of a dealer registered under turnover
tax exceeds Rs. 20 lacs, he shall at once bring it the notice of
the concerned Assessing Authority and apply for a TIN.
Q51. What is the procedure for filing of returns?
A:
Every registered dealer other than a casual trader shall submit
a quarterly return (Form VAT-11 by a VAT dealer or a voluntary
registration dealer and Form VAT –12 by a dealer liable to
turnover tax) containing particulars of sales and purchases
accompanied by proof of full payment of any tax due, to the
Jurisdictional Assessing Authority within one month from the
expiry of each tax period.
Every casual trader shall furnish to the Jurisdictional Assessing
Authority a quarterly return in Form VAT-13 along with proof of
full payment of tax due within one month after the expiry of
the quarter.
Every dealer other than a Casual trader liable to pay tax under
the Act shall also furnish an annual return. Such return shall be
filed in Form VAT 11-A by a VAT dealer or a voluntary
registration dealer, and in Form VAT 12-A by a turnover tax
dealer within 120 days from the expiry of that year. A trading
account shall accompany every such return. Every VAT dealer
shall also furnish alongwith annual return and trading account a
list of VAT invoice books used during the year mentioning
therein the total number of VAT invoices issued out of each
VAT invoice book so used.