VAT Audit

Vat is the value added tax. VAT is a modern and progressive form of sales tax. It is a
multipoint tax with provision for granting setoff or credit of the tax paid on the
purchases against the tax payable on sales.
value added = sale price - purchase price.
The difference between our total VAT output and VAT input will be paid to the Government.

Why VAT Audit?

- To ensure high quality audit in an economic, efficient and effective manner;
- To Support the correctness of computation of tax and total turnovers;
- To ensure that the books of accounts and other records are maintained properly
- To facilitate the assessing authority to obtain proper and correct information about the dealer;
- To ensure whether the dealer has claimed the input tax set-off
- To determine the correct rate of tax charged by the dealer
- To verify the system of self-assessment and scrutiny of returns / statements filed by the dealer will be ensured

Applicability of VAT Audit

VAt Provisions require a dealer to get the books of accounts audited and submit a statement of accounts duly certified by
such auditor in Form VAT 240, within a perid of Nine months.

Registered dealers not being a company defined under the companies Act, 1956 or a company incorporated outside India,
having “Total Turnover” not exceeding Rupees One Hundred lakhs in a year.
Auditor should be : Chartered Accountant or Cost Accountant or a Tax Practitioner

Important Terms:

Turnover= The aggregate amount for which goods are  sold or distributed or delivered or otherwise disposed
of in any of the ways referred to in clause (29)(i.e., sale) by a dealer, either directly or through another,

Total turnover = The aggregate turnover in all goods of a dealer at all places of business in the state,
whether or not the whole or any portion of such turnover is liable to tax, including the turnover of purchase
 or sale in the course of interstate trade or in the course of export/import of the goods and the value of goods
transferred or dispatched outside the state otherwise than by way of sale.

The total turnover includes ED,VAT,CST,ST & freight & Insurance will be included if it is recovered from the customers.
But shall not include the stock turnover

The VAT form 240 is divided into 4 parts:

1) Certificate - Auditor has to certify the accuracy of books of accounts
2) General Information - Providing the particulars about the dealers & its business
3) Particulars of turnovers, deductions & payment of taxes
4) Particulars of declarations & certificates

The detailed checks of the various aspects of VAT in respect of the following areas
are enumerated in the annexes indicated against them.

• Registration of dealers (Annex I)
• Submission and scrutiny of returns (Annex II)
• Self/provisional assessment (Annex III)
• Business/Tax Audit assessment (Annex IV)
• Refunds, set off and compensation claims (Annex V)
• Input Tax Credit (ITC) (Annex VI)
• Payment and recovery of tax, penalty and interest (Annex VII)
• Miscellaneous (Annex VIII)

Penalty:

Failure to submit the copy of audited statements- Rs. 5,000 & Rs.50 per day for continuous default

“Swachh Bharat Cess”

• Introduction

SBC is tax in addition to Service Tax which shall be levied and collected in accordance with the provisions of Chapter VI of the Finance Act, 2015,called “Swachh Bharat Cess”.

SBC has been imposed for the purposes of financing and promoting Swachh Bharat initiatives by government.

• Applicable Rate

SBC is additional levy of 0.50% on all the taxable service with effect from 15th November 2015. SBC would be calculated in the same way as Service tax is calculated.

• Treatment

Swachh Bharat Cess will be levied only on taxable services. This means SBC will not be imposed on exempted services and non -taxable service in Negative list. 

• Separate Disclosure

SBC needs to be charged separately on the invoice, accounted for separately in the books of account. SBC may be charged separately after service tax as a different line item in invoice. It can be accounted and treated similarly to Education cesses.

• Journal Entry

1	Under Normal service tax treatment India Motors……………………. Dr           To, Sales – Service           To, Service Tax           To, SBC (Being - sale of service to India Motors)	1,00,000	18,825 14,000 500
2	Under Reverse charge mechanism Transportation  Charges………Dr            To, Bank a/c            To, Service Tax*            To, SBC** (Being - Transportation charges paid)	50,000	47,825 2,100 75
3	Payment Service Tax…………………………Dr SBC…………………………………….Dr            To, Bank a/c (Being - Service tax paid)	16,100 575	16,675

Note:	*Under reverse charge mechanism for Goods transport agencies, service tax will be
	charged for service recever at the rate of 0.042%(i.e.,14%x30%)
	**For SBC the rate under Reverse charge mechanism, SBC rate will be 0.0015%(i.e.,0.50%x30%)

• Credit of SBC cannot be availed. Further, SBC cannot be paid by utilizing credit of any other duty or tax.

          No Input Credit

• Point Of Taxation

Date of Completion of Service	Date of issue of invoice	Date of receipt of payment	Effective rate
Before 15/11/2015	After 15/11/2015	After 15/11/2015	14.50%
Before 15/11/2015	Before 15/11/2015	After 15/11/2015	14%
Before 15/11/2015	After 15/11/2015	Before 15/11/2015	14%
After 15/11/2015	Before 15/11/2015	After 15/11/2015	14.50%
After 15/11/2015	Before 15/11/2015	Before 15/11/2015	14%
After 15/11/2015	After 15/11/2015	Before 15/11/2015	14.50%

• Computation under reverse charge mechanism

As per Finance Act, 2015, the provisions of Chapter V of the Finance Act, 1994, and the rules made there under are applicable to SBC also. I.e., the reverse charge under the Finance Act, 1994, is made applicable to SBC.

• Computation in case of Abatement

Taxable services, on which service tax is levied on a certain percentage of value of taxable service, will attract SBC on the same percentage of value as applicable for service tax.

For example, in the case of GTA, computation would be (14% Service Tax + 0.5% SBC) X 30% = 4.35% (4.20%+0.15%) 

• Conclusion

Although SBC is referred to as Cess, it is levied on value of taxable service not on Service tax amount. By this the effective rate of Service tax rate will be 14.5%, which is increased from earlier rate 14%

What is CIN??

 Do you deal with companies? Have you ever come across a alphanumeric 21 digit code called CIN? Whenever you will look at Company’s details, you would see a CIN i.e. Company Identification Number. As the name suggests, every company that is incorporated in India is given a unique code at the time of its incorporation which is called the Corporate Identification Number (CIN) of that company. This code is given irrespective of whether the company is a listed company, private company, public company or One Person Company. You can look for CIN of the companies in a corporate directory. CIN is also mentioned on the letter head of the company. Can a Company’s CIN change? Yes. CIN is the number with which you identify a company. Typically CIN is to remain with the company for a lifetime but in few cases, the CIN of the company may change: Change in State where registered office of the company is situated The listing status of the company changes The industry of the company changes The company becomes public limited from private limited or vice versa Breaking the CIN Code CIN is not a random alphanumeric 21 digit code given to companies. It in fact, stores vital information in it. Let’s understand it by an example:

 CIN Number is basically divided into 6 parts.           

 Each part contains some information about the Company:

 1. First Digit represents the listing status – A Company may be either listed or unlisted. First Digit of the CIN indicates the Listing status of the company. If the company is listed, It will be mentioned “L”, if the company is unlisted, it will be mentioned “U” as the first digit of the CIN.

 2. Next Five Digits represents the Industry Code – Depending on the business line chosen by the company, the Company selects an industry in which it intends to operate. Accordingly, a suitable industry code is allotted to the company.

3. Next Two Digits represents the State Code – These digits represent the State in which the registered office of the company is situated. Therefore, it helps us know which Registrar or ROC is applicable with respect to the company. For Example: If the company has been registered in Maharashtra, the Code would be “MH”. In case, the company shifts its registered office to some other place later, the CIN would change due to change in the State Code.

4. Next Four Digits represents the year of incorporation of the Company – These digits represents the year in which the company was incorporated. By looking at the CIN of the company, one can tell that the year in which the company was incorporated.

5. Next Three Digits represents the type of the company – These three digits specify the type of the company. A company may be any of the following: – Public Limited Company (PLC) – Private Limited Company (PTC) – Government of India Company, Centre (GOI) – One person Company (OPC) – Company of State Government (SGC) – Section 8 Company – Not for Profit (NPL)

6. Last Six Digits – These last digits define the ROC Registration Number of the company. They are unique numbers given to every company at the time of incorporation by the ROC in which they are registering. This number depends on the ROC in which the company is registering and also the Industry which has been allocated to it. This is what the 21 digit CIN Code comprises of. Next time, you see CIN of a company, there would be many things that you should be able to tell.

Amendments in Service Tax

      The definition of “Chit”, “Entertainment event” and “Amusement facility” has been omitted by way of Notification

      The rate of Service Tax as increased from 12% to 14%

      After the rates has been increased, there is no Education Cess and Secondary and Higher Education Cess on service tax

      Exemption of carrying out an intermediate production process as Job work in relation to alcoholic liquor for human consumption is removed Mega Exemption Notification, & by making such services as taxable.

      For the following the exemptions are available:

• Admission to museum, national park, wild life sanctuary, tiger reserve or zoo
• Admission to exhibition of cinematographic film, circus, dance or theatrical performance including drama or ballet
• Admission to any sporting event organized by a recognized sports body where the participating team or individual represent any district, state, zone or country.
• Admission to award function, concert, pageant, musical performance, sporting event other than recognized sport event is exempted from levy of service tax provided consideration is not more than Rs.500/-

      Taxable services provided under Power System Development Fund Scheme of Ministry of Power are exempted from the whole of levy of service tax till 1st day of April 2017. Such exemption shall be eligible subject to production of Certificate before Central Excise Officer and other conditions.

      Increase in rates of service tax (in case of Composition scheme) for service provided by Air Travel agent, Insurance service, Forex (money changing service) and service provided by lottery distributor and selling agent.

1.       Air Travel Agent:

·         Domestic bookings of route for travel by air---- 0.7% of the basic fare

·         International bookings of route for travel by air---- 1.4% of the basic fare

2.       Insurance Service:

·         First year ----   3.5% of the gross amount of premium charged

·         Subsequent Year ---- 1.75% of the gross amount of premium charged

3.       Money Changing (Forex)

·         Upto Rs.100,000 ----  0.14% of the gross amount of currency exchanged or Rs.35 whichever is higher

·         Exceeding Rs.1,00,000 and upto Rs.10, 00, 000 ---- Rs.140 + 0.07% of the (gross amount of currency exchanged-Rs.1,00,000)

·         Exceeding Rs.10,00,000 ---- Rs.770 + 0.014% of the (gross amount of currency exchanged -Rs.10,00,000) or Rs.7,000/- whichever is lower

4.    Service provided by lottery distributor and selling agent

·         Where the guaranteed lottery prize payout is > 80% ---- Rs.8,200/- on every Rs.10 Lakh (or part of Rs.10 Lakh) of aggregate face value of lottery tickets printed by the organizing state for a draw.

·         Where the guaranteed lottery prize payout is < 80% ---- Rs.12800/- on every Rs.10 Lakh (or part of Rs.10 Lakh) of aggregate face value of lottery tickets printed by the organizing state for a draw

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Budget - 2015 - For Individuals & HUF

                            Budget - 2015 - For Individuals & HUF

                                Personal Income Tax (PIT)                            

There are no changes in the tax slabs including the Basic exemption limits. The previous year tax slabs to be continued for Individuals.

Basic Exemption limits are as mentioned below:

• For Senior Citizens, age between 60 – 79 years being a resident in India the basic exemption is Rs.3,00,000/‐
• For Senior Citizens, above the age of 80 years being a resident in India the basic exemption is Rs.5,00,000/‐
• For other assesses includingWomen Assessee, HUF, Non Resident, the basic exemption is Rs.2,50,000/‐

Maximum benefit for normal Individuals post this Budget is estimated to be Rs 4,44,200/-

• Surcharge increase from 10% to 12% on tax amount for Individuals and HUF whose Taxable Total Income is more than Rs. 1 Crore.
•  Surcharge has been increased from 10% to 12% where income exceeds One Crore rupees.

Deductions u/s 80C to 80U
The deduction limit under Section80CCC have been increased to Rs.1,50,000/- from Rs.1,00,000 for any amount received under LIC Annuity Pension Plan.
• Deduction under section 80CCD has been reduced to 50,000/- from 1,00,000/- for contribution to the pension scheme of central government.
• Limit of deduction of health insurance premium increased from Rs.15,000/- to Rs.25,000/- for assessee below age of 60 years and for senior citizens limit increased from Rs.20,000/- to Rs.30,000/- u/s 80D in case of individual and HUF.
• Very Senior citizens above the age of 80 years, who are not covered by health insurance, to be allowed deduction of 30,000/- towards medical expenditures u/s 80D in case of individual and also expenditure incurred on parents who are very senior citizen.
• Where the assessee is a HUF, the amount paid towards health insurance premium of any member of HUF the deduction amount has been enhanced from 15,000/- to 25,000/-.
• Where the assessee is a HUF, the amount paid on account of medical expenditure of any member of HUF (Very Senior Citizen) the deduction is allowed to the extent of Rs.30,000/-.
• Deduction in respect of maintenance including medical treatment of a dependent – who is person with disability - Section 80DD - is enhanced to Rs.75,000/- from 50,000/- .In case of dependant is a person with a severe disability deduction is enhanced to Rs.1,25,000/- from Rs.1,00,000/-.
• Deduction limit of Rs.40,000 with respect to specified disease of serious nature under section 80DDB limit has enhanced to Rs.80,000/- in case of very senior citizen.
• Donation made to National Fund for Control of Drug Abuse (NFCDA), Swachh Bharat Ko shandthe Clean Ganga Fund to be eligible for 100% deduction u/s 80G of Income - tax Act.
• U/s 80U - Person with disability Deduction limit is enhanced from Rs.50,000/- to Rs.75000 and with respect to severe disability the limit is increased to Rs.1,25,000/- from Rs.1,00,000.
• Payments to the beneficiaries including interest payment on deposit in Sukanya Samriddhi scheme to be fully exempt.