Sales Tax Compliance

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Reading Time: 3 minutes| (Last Updated On: February 5, 2019)

Sales Tax Compliance

Sales Tax Compliance involves certain obligations on the part of tax payer that have to be adhered by all the sellers irrespective of their business size or model. Consequently, sales tax rules have to be followed by every seller engaged in the business activities. Value Added Tax, the most integral aspect of Sales Tax Compliance levied at all the stages of sale at state level is purely a self-assessment system that brings the most needed transparency. Yes, this has been made possible due to the fact that during the imposition of Value Added Tax, consumer as well as the trader knows the element of tax involved as a part of consideration to be paid by him/her for acquiring a specific commodity.

Sales Tax Compliance

Value Added Tax is a self-policing system which also reduces the scope of tax evasion. This is due to the reason tax is collected at every stage which means that there are minimal chances of avoiding tax which further leads to high revenue-income elasticity in VAT. Not only this, the Value Added Tax banishes the complex procedure involved in Local Statutory Forms. Although, the Central Forms are here to stay as long as Central Sales Tax is phased out entirely. Among the plethora of advantages that the Value Added Tax has brought to the traders as well as consumers, the imperative one is that it provides a set-off of tax paid on capital goods for the purpose of trading and manufacturing.

As far as VAT in Delhi is concerned, there is a general scheme of Delhi VAT Act as per Delhi High Court under which a dealer has to pay tax at the prescribed rates on each sale of goods effected by him/her. Not to forget, certain sales that are liable to tax deductions have been granted exemption from tax. All these goods are listed in the First Schedule to the Act.

Under the general scheme of VAT, a dealer is liable to tax credit under Section 9(1) in context to the purchases made by him during the tax period for the purpose of making sales that have to be taxed under Section 7. On the other side, Section (9) enables tax credits in context to the inputs that are used to effect sales which are liable to tax and which are not liable to tax. Delhi Value Added Tax, 2004 aims to strengthen the government. Moreover, there are also some attractive composition schemes for specific classes of dealers.

FAQS on Sales Tax Compliance

Q1. What does VAT imply?

Ans: Value Added Tax is basically the consumption tax on goods by the consumers that needs to be borne by the consumers.

Q2. Does Value Added Tax System makes the procedure of maintaining the Book of Accounts complex?

Ans: Value Added Tax doesn’t make the book maintenance procedure complex. Instead, it simplifies the process for the dealer. As the dealer is supposed to maintain two registers- Sales Book and Purchase Book. In Sales Book, sales made and tax collected from the purchaser are recorded chronologically whereas in purchase book, purchases made and tax paid on such purchases are recorded.

Q3. Can VAT system work on items which have prescribed MRP inclusive of tax?

Ans: MRP can be inclusive of tax, thus VAT system works on items with prescribed MRP inclusive of tax. In order to calculate the tax component and tax exclusive price, tax fraction [r/(r+100) where r is the tax rate] on the MRP can be applied.

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