FOR MY FELLOW MEMBERS AT THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF INDIA
ATTENDING THE SEMINAR ORGANISED BY EIRC of THE
INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA ON
DECEMBER 13, 2014
VAT Audit
CA Prasun Kumar Bhattacharyya , FCA
Jyotish Samrat Bhavan
88/2A Rafi Ahmed Kidwai Road, Kolkata – 700 013
Telephones (033) 22492814, 22649106 (0)9830056571
Email:- prasun1961@gmail.com
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The governing provisions conferring the conduct of audit are Section 30E
of the West Bengal Value Added Tax Act, 2003 read with Rule 44 of the
West Bengal Value Added Tax Rules, 2005 They run as follows :Section 30E. Statements, accounts, audit reports or declarations
to be furnished by registered dealers and penalty for non
furnishing the same. (1) Every registered dealer shall, in the manner
as may be prescribed, submit before the prescribed authority such
statements, accounts or declarations within such time as may be
prescribed and shall verify that such statements, accounts or
declarations are true to the best of his knowledge and belief.
(1A) Every registered dealer, other than Public Limited Company or
Private Limited Company registered under the Companies Act, 1956
whose turnover of sales or contractual transfer price or both, or
turnover of purchases exceeds rupees five crore in a year or part of
a year, shall, within such date as may be prescribed submit before
the prescribed authority, a Profit and Loss Account and Balance Sheet
for such year, alongwith the audit report of a Chartered Accountant
within the meaning of Chartered Accountant Act, 1949 (38 of 1949),
or a Cost Accountant within the meaning of The Cost and Works
Accountant Act, 1959 (23 of 1959), in the prescribed form.
(1B) Every registered dealer, being a Public Limited Company or
Private Limited Company registered under the Companies Act, 1956
shall, within such date as may be prescribed, submit before the
prescribed authority, a copy of the audited Profit and Loss Account
and Balance Sheet for such year, alongwith the audit report of any
Chartered Accountant within the meaning of the Chartered
Accountant Act, 1949 (38 of 1949), or any Cost Accountant within the
meaning of The Cost and Works Accountant Act, 1959 (23 of 1959), in
the prescribed form.
(1C) Every registered dealer, other than those mentioned in sub
section (1A) or subsection (1B) whose turnover of sales or contractual
transfer price or both or turnover of purchases excess rupees one
crore and fifty lacs in a year or part of year shall within such date as
may be prescribed submit before the prescribed authority a copy of
the Profit and Loss Account and Balance Sheet for such year
alongwith a self audit statement in the prescribed form.
(2) If a registered dealer fails to submit statements, accounts, audit
reports or declarations, as the case may be, referred to in sub-section
(1), sub-section (1A), sub-section (1B) or sub-section (1C), he shall be
liable to pay a penalty not exceeding rupees five thousand for each
default, in the manner as may be prescribed.
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Statements, accounts and declarations required to be furnished
under sub-section (1) of section 30E and penalty for failure to
submit such statements, accounts and declarations.
Rule 44 – Submission of statements, accounts and declarations
under sub-section (1) of section 30E -Rule 44 (1) Omitted with effect
from 01/04/2008
(2) Every registered dealer, other than Public Limited Company or
Private Limited Company registered under the Companies Act, 1956
whose turnover of sales or contractual transfer price or both or
turnover of purchases exceeds five crore in a year , shall within 31st
day of December from the end of the year submit before the
appropriate assessing authority, a Profit and Loss Account and
Balance Sheet for such year alongwith the audit report of a Chartered
Accountant or a Cost Accountant in Form No. 88
Provided that notwithstanding anything contained in this sub-rule, a
registered dealer referred to in this sub-rule may submit before
appropriate assessing authority a Profit and Loss Account and
Balance Sheet for the year ending on 31st day pf March 2007
alongwith the audit report of a Chartered Accountant or a Cost
Accountant in Form 88 in respect of such year within the 31st day of
July, 2008.
(3) Every registered dealer, being a Public Limited Company or a
Private Limited Company registered under the Companies Act, 1956
shall, within 31st day of December from the end of the year submit
before the appropriate assessing authority, a copy of the audited Profit
and Loss Account and Balance Sheet for such year, alongwith the
audit report of any Chartered Accountant or any Cost Accountant in
Form No. 88
(4) Every registered dealer, other than those mentioned in sub section
(1A) or subsection (1B) whose turnover of sales or contractual transfer
price or both or turnover of purchases excess rupees one crore and
fifty lacs in a year or part of a year shall within 31st day of December
after the end of the year, submit before the appropriate assessing
authority, a Profit and Loss Account and Balance Sheet for such year,
alongwith a self audit statement in Form No. 88A.
Notes :It is now mandatory for every dealer to get his accounts audited either by a
Chartered Accountant or a Cost Accountant and submit the report in Form
No. 88 along with Profit & Loss Account and Balance Sheet within 31st
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December from the end of the concerned financial year, provided the
annual turnover of the dealer exceeded :(a)
(b)
(c)
(d)
(e)
Rs.40 Lacs (applicable for each accounting period of twelve
months/each financial year from 01.04.2005 to 31.03.2008)
Rs. 1 crore (applicable for each accounting period of twelve
months/each financial year from 01.04.2009 to 31.03.2010)
Rs. 1.50 crore (applicable for each accounting period of twelve
months/each financial year from 01.04.2010 to 31.03.2011)
Rs. 3 crores (applicable for applicable for each accounting
period of twelve months/each financial year from 01.04.2011
to 31.03.2012) – Section 5(7) of the Finance Act, 2012
(Notification No. 458-L dated 31/03/2012
Rs. 5 crores – on and from 01.04.2012 onwards, Trade Circular
7/2013 interpreting Section 3(10) of the Finance Act, 2013 –
Is it correct?(Notification No. 543-L dated 26/03/2013)
If any of the stipulated documents are not furnished within the due date of
31st December then a Penalty of Rs.5,000/- for each default will be imposed
upon the dealer failing to submit the report in terms of Sub Section 2 of
Section 30E.
The Ld. Commissioner of Sales Tax, West Bengal has been
approached to extend the date of filing VAT Audit report for the
financial year 2013-2014. The matter is under his consideration.
Jut going back to history - The West Bengal Taxation Tribunal in November
2007 in the case of M/s. G. K. Engineering Works & Stores Pvt. Ltd Vs. the
Govt. of West Bengal, held that the amended Rule 44 (3) of the VAT
Rules,2005 was ultra vires the provisions of the VAT Act,2003 and more
particularly Section 30 E of the said Act so far as the submission of the
VAT audit report by a Chartered Accountant in Form 88 was concerned. In
view of the judgment a large number of dealers did not submit their VAT
Audit Report within the due date of 31st December, 2007. As such the said
last date had been extended to 31st July, 2008 for non-corporate dealers.
Govt. of West Bengal amended the VAT Act, 2003 with retrospective effect
from 1st April , 2005 and issued a gazette Notification No. 493-L on 28th
March 2008 wref 1/4/2005 to the effect that it makes the VAT audit
compulsory for all dealers having annual turnover above Rs 40 lac, the
threshold limit was, however, increased to Rs 1crore with effect from 1st
April 2008. With effect from 1st April, 2007, the amendment also empowers
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the Cost Accountants along with the Chartered Accountants to carry out the
VAT audit.
It will now be interesting to see what the Act and Rules prescribe regarding
maintenance of books of accounts and records.
The relevant provisions are Section 63 of the West Bengal Value Added Tax
Act, 2003 read with Rule 87 of the West Bengal Value Added Tax Rules,
2005 and they run as follows :Section 63. Maintenance of Accounts, records, etc. (1) Every dealer
required to furnish return, under sub-section (1) of section 32, shall
maintain and keep a true and up-to-date account of the quantity and
value of the goods purchased or manufactured or sold by him or
used in execution of works contract or held by him in stock and
shall maintain and keep such registers or accounts, in such form as
may be prescribed, in addition to the books of accounts that a dealer
maintains or keeps for the purposes of his business:
Provided that––
(a) a registered dealer, or a dealer who has applied for registration
within thirty days from the date of his incurring liability to pay
tax under sub-section (2) of section 23, other than those
required to pay tax at compounded rate under subsection (3) of
section 16 or sub-section (4) of section 18 or any other dealer as
may be prescribed, shall maintain a true and up-to-date
account of his input tax, input tax credit and output tax;
(b) in case of any other dealer, such dealer shall maintain a true
and up-to-date account of his output tax only.
(2) Every dealer referred to in sub-section (1) shall keep at his
principal place of business all accounts, registers, documents
including those in electronic form and digital signature certificate
granted under sub-section (4) of section 35 of the Information
Technology Act, 2000 (21 of 2000), which may be required by the
Commissioner for the purpose of inspection under sub-section (2) of
section 66, and shall not keep or remove elsewhere such accounts,
registers, documents and certificate except in accordance with the
requirement of law or except for any purpose for which just cause is
shown to the satisfaction of the Commissioner.
Rule 87. Maintenance of accounts, registers, documents, tax
invoices, invoices, bills, cash memos, vouchers, etc.
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(1) Every registered dealer, other than those enjoying composition
under sub-section (3) of section 16 or sub-section (4) of section 18 or a
shipper of jute, shall, in his input tax account, record tax paid or
payable on purchases as referred to in clause (18) of section 2 and
on which input tax credit as per the provisions of section 22 is
available.
(2) Every dealer, required to furnish return under sub-section (1) of
section 32, shall, in his output tax account record(a) tax paid or payable on turnover of sales under sub-section
(2) of section 16;
(b) tax paid or payable on turnover of sales under sub-section
(3) of section 16;
(c) tax paid or payable on taxable contractual transfer price as
referred to in sub-section (1) of section 18;
(d) tax paid or payable on contractual transfer price as
referred to in sub-section (4) of section 18 ;
(e) purchase tax payable under section 11 and under section
12.
(3) Every registered dealer, to whom input tax credit is available,
shall, for the purpose of determining net tax credit for a tax period,
referred to in sub-section (17) of section 22, record the following in
the input tax credit account –
(a) input tax on which credit is available;
(b) outstanding input tax credit of the previous tax period;
(c) credit availed which has to be reversed.
(4) Every dealer, required to furnish return under sub-section (1) of
section 32, shall maintain way bills received and documents,
vouchers, tax invoices, invoices, bills or cash memos, counterfoils
of way bills issued by him, as may be required in support of any
entry in his accounts, registers, documents including those in the
form of electronic records, that he is required to maintain under
section 63.
(5) Every dealer required to furnish return under sub-section (1) of
section 32, shall maintain accounts relating to the quantity and
value of goods purchased, or manufactured, or sold, or used in
execution of works contract, or held in stock in accordance with
the 1[accepted principals of accounting] which should be consistent
with the method or system earlier followed by him:
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Provided that where a dealer intends to change the method or
system being followed by him, he shall inform the assessing authority
beforehand.
Notes :-
Step 1 (Mandatory) After receipt of appointment letter from the dealer,
obtain NOC from previous auditor if the VAT audit of the previous
accounting period was done by some other CA/ CA firm.
Step 2 (Keep in mind) - While filling up Form No.88 certain issues may be
taken note of by fellow members before signing the VAT Audit Report in
Form 88. Those are enumerated below: a) In case of Proprietorship Firm or Partnership Firm the name of the
dealer should be either the “Sole Proprietor” carrying on business
under the trade name & style of M/s. XYZ”.
b) The 11 digit TIN number under both the VAT & CST Act should be
clearly mentioned.
c) If any qualification, observations and comments are to be made in
the Audit Report then those should be specified clearly in Part 1 of
Form 88.
d) The address of the dealer should be the principal place of business
and not the address of any additional place of business.
e) The audit certification in Part 1, paragraph 2 offers sampling method
as a tool – in fact paragraph 3 highlights the limitation.
f) As regard to the Turnover of the dealer, in the VAT Act the
aggregate sale price means net Turnover made within the state and
gross central turnover made outside the state. As a result of the
peculiar definition of aggregate value of sales, a reconciliation of
aggregate sale price as per returns with sales figures stated in the
audited Profit And Loss Account becomes necessary. Such
reconciliation of turnover as per returns with books of accounts
whether correct or not are required to be stated within the report.
Issue of credit notes (allowable or not) be kept in mind here
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g) If any fixed assets (Except immovable fixed Assets) have been sold
off during the year, the said figure forms part of the aggregate sale
price within the meaning of sale under the VAT Act, 2003. Such sale
figure of fixed assets shall also be included in the Turnover of the
dealer.
h) About the nature of business the category as specified in the
Registration Certificate of the dealer should be mentioned in the
Report. If any changes has taken place in the nature of business as
compared to those stated in R.C. then the comments should be made
in Part 2 of the Report. Similarly in the case of classes of goods dealt
in by the dealer are to be mentioned in Part 2 of the Report.
i) A lot of ratios have been asked for in Part 2 of the report (Sl 14 to Sl
18)
j) For manufacturers extra information in the form of input output ratio
are to be stated (Sl 19)
k) As regard to Input Tax credit up to 31st March, 2008, ITC was
available on local purchase of Raw Materials, Stores & Consumables,
Packing Materials and Plant & Machinery. With effect from 01st April,
2008 the availability of ITC has been restricted to only raw materials,
packing materials & first hand Plant & Machinery in case of a
“Manufacturer dealer” and only on Items traded, packing materials &
preserving equipment for a “Reseller dealer”.. Please refer to
Section 22 of the West Bengal Value Added Tax Act, 2003 and
Rule 19 to Rule 23 of the West Bengal Value Added Tax Rules,
2005 to gain proper insight into the provisions of Input Tax
credit.
l) Regarding Purchase Tax Payable u/s 11 & 12 all purchases from un
registered dealers within the state needs to be considered whether
those are directly used in manufacturing/trading or not. But, the
liability will be restricted only on those purchase from un-registered
dealers which are not directly used in manufacturing/trading as
currently no Purchase Tax is payable on purchase from unregistered
dealers of raw materials and traded items.
m) Due care should be taken so that no ITC is considered in respect of
items specified in Negative List as stated in Section 22(4) of the VAT
Act. Similarly, ITC is not available on those purchases where Original
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Tax Invoices are not available. If the Original Tax Invoice is lost
from the custody of the dealer then he should make an application
before Commissioner for exemption from production of Original
Tax Invoice as stated in Section 64(4).
n) As regard to Stock Transfer to other states, the ITC available for all
local purchases has to be reversed either following self accounting
method or as per formula specified in sub-rule 4 of rule 23.
A SYNOPSIS OF FORM 88 - PARTWISE
PART – 1
AUDIT AND CERTIFICATION
Sl 1 – audittee details
Sl 2- opinion / sampling leeway
Sl 3 – Subject to sl 2, certify 18 points
PART 2
General Information
PART-3
DETAILS OF AGGREGATE OF SALES, TURNOVER OF SALES,
VARIOUS DEDUCTIONS U/S 16(1), OUTPUT TAX, NET TAX,
INTEREST, ETC.
Schedule 1
[For works contractors claiming deduction for labour, service and other
like charges ascertainable from books of accounts under rule 30(1)]
Schedule 1A
[For works contractors claiming deduction for labour, service and other
like charges not ascertainable from books of accounts under rule 30(2)]
TABLE A
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Statement about deduction for labour, service and other like charges
and computation of tax on taxable contractual transfer price u/s 18(3)
read with rule 30(2)
[i.e. deduction and computation using the Table given in rule 30(2)]
Schedule 2
[Details of Form 18 received or receivable towards payment of tax
deemed to have been made in terms of sub-section (4) of section 32 by
way of deduction of tax at source under section 40]
Schedule 3
[Purchase tax payable u/s 11 or/and u/s12]
PART-3A
[Details of contractual transfer price for those paying tax u/s 18(4),
output tax, net tax, interest, etc.]
PART-3B
[For registered dealer enjoying deferment or remission or exemption
under section 118(1) ]
PART 4
[Details of purchase of goods directly dealt in by the dealer and stock
transfer to him]
Annexure 1 of Part 4
[Details of purchases exceeding Rs. One lakh in a year from a new local
supplier or a supplier whose accounts were squared up during the year
and on which input tax credit or input tax rebate has been claimed
during the year.]
Local supplier means a supplier who is a registered dealer of West Bengal
and from whom no purchase was effected in the immediately preceding year.
Page 10 of 14
Annexure 2 of Part 4
Input tax credit on stock of goods u/s 22(9) read with rule 22, if any.
PART 5
[Details of various forms/certificates issued * and / or received by the
dealer during the period]
PART 6
[Remarks and observations in detail for the difference found between
the amount as shown in the return and the amount as found upon audit
and shown in Table 3 and its relevant Schedules and Annexures.]
REQUISITION FOR THE FOLLOWING FROM CLIENTS
BEFORE COMMENCEMENT
1.
Audited Accounts of the Branch – if it is not done as a system
then the Trial Balance of the Branch duly certified by the
Central Auditor.
2.
Sales ledger.- evidencing inter-state sales and local sales
separately. Whther any Fixed Asset sold during the year – if
yes, the details thereof.
3.
Purchase ledger – inter state purchase and local purchase
being shown separately.
4.
Unregistered Purchase ledger – provide ledgers of Printing
stationery, staff welfare, repairs & maintenance.
5.
Purchase Tax Ledger showing A/c head, Amt of Purchase,
Goods Involved, @.........%)
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6.
Stock Transfer made outside the state – if yes, month-wise
breakup reconciling them with Form “F”: received
7.
Intra branch transfers within the State
8.
Input tax credit as per books.
9.
Stock transfer from outside the State to the dealer – linking it
with Form F issued, if any.
10. Waybill
Details. (No. of waybills in Form 50/50A issued to the
dealer, No. of waybills in Form 50/50A utilised by the dealer,
Total value of import as per Form 50/50A utilised)
11. Details
of Purchase exceeding Rs.1Lacs in a year in the
following format:(Local supplier’s Trade Name, Tin No., Major-Input, Use, Amt
of Purchase exclusive tax, Applicable tax rate, ITC Claimed.)
12. Enrolment or Registration Certificate No. under W.B.
Profession Tax, Etc, Act, 1979
13. Amount
of Profession Tax paid for the period under audit
14. Central
Excise Registration No. if any
15. Income
Tax PAN
16. Service
Tax Registration No.
17. Nature
of
resale/manufacture/importer/exporter/works
contractor/lessor/others (please specify)
18. Classes
business:
of main goods dealt with by the dealer
19. Change
in the nature of business, if any, during the year: (The
brief particulars of such change i.e. new products, new
capacities etc. is to given)
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20. Books
of account maintained: (In case books of account are
maintained in a computer system, mention the books of
account generated by such computer system)
21. Method
of valuation of stock: [Brief Particulars of change, if
any, to be stated]
22. Balance
Sheet, Profit & Loss Account both all India Level(if you
have multi state activities) & State Level.
23. Particulars
of all operating Bank Accounts within the State of
West Bengal. (Bank, Branch, Account No.)
24. E-mail
address
25. Hard
copy submission date/s of Original & Revise Return,with
evidence.
26. Form
C issued, if any in respect of goods purchased within the
meaning of sec. 3(a) of the CST Act, 1956. [Amount involved
(Rs), Form / Certificate of (Rs)]
27. Form
F, if any. issued in respect of goods received on account
of Stock Transfer from outside the State under section 6A of
the CST Act, 1956. [Amount involved (Rs), Form / Certificate of
(Rs)]
28. Form
H issued in respect of goods purchased from other
State(s) of India within the meaning of section 5(3) of the CST
Act, 1956. [Amount involved (Rs), Form / Certificate of (Rs)]
29. Form
12A issued in respect of goods purchased from
registered dealers of West Bengal within the meaning of
section 5(3) of the CST Act, 1956. [Amount involved (Rs), Form
/ Certificate of (Rs)]
30. Form
C received in respect of goods sold- (a) within the
meaning of sec. 3(a) of the CST Act, 1956. & (b) within the
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meaning of sec. 3(b) of the CST Act, 1956. [Amount involved
(Rs), Form / Certificate of (Rs)]
31. Certificate
in E I *and/or E II received, in respect of Srl. No.
30(b). [Amount involved (Rs), Form / Certificate of (Rs)]
32. Form
F received in respect of goods sent on Stock Transfer to
other State(s) under section 6A of the CST Act, 1956. [Amount
involved (Rs), Form / Certificate of (Rs)]
33. Form
H received in respect of goods sold to dealers of other
State(s) of India within the meaning of section 5(3) of the CST
Act, 1956. [Amount involved (Rs), Form / Certificate of (Rs)]
34. Form
12A received in respect of goods sold to registered
dealers of West Bengal within the meaning of section 5(3) of
the CST Act, 1956. [Amount involved (Rs), Form / Certificate of
(Rs)]
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