What is VAT?
Synonymous with the Central Service Tax (CST) Registration and the Taxpayer Identification Number (TIN) Registration, Value Added Tax (VAT) Registration, is a necessity for any business, be it a proprietorship or a partnership, involved in trading and manufacturing any kind of products. Registered businesses can also opt for the Input Tax Credit (ITC) and apply them on future sales. This relieves the businesses from having to pay the VAT themselves but instead it gets added to the retailer invoice and the customer ultimately pays for it.
VAT registration is mandatory if your annual turnover is more than Rs 5 lakh, while it is Rs 10 lakh for certain states. VAT rates vary in different states in India, as well as the category of business and the goods delivered. It is based on the value addition to the manufactured goods. VAT ID owners with annual turnover of Rs 50 lakh are also entitled to the Composition Scheme, in which case, the particular business has to compromise on the ITC. The Composition Scheme enables one to pay a small percentage of tax over the gross turnover.
How to get it?
The following steps indicate the basic procedures for a VAT ID registration:
1. Locate the Central Tax Office in your city which houses the VAT registration department as well.
2. Collect the registration form from the VAT office.
3. Fill out the application and submit along with the following documents:
a). Central Sales Tax registration certificate (Form A)
b). Professional Tax registration certificate
c). Address and ID proof of the Proprietor/Partner/Director
d). Four passport-sized photographs of the Proprietor/Partner/Director
e). PAN Card and Bank Account Number of the Proprietor/Partner/Director
f). Details of business activities
g). A copy of the Rental Agreement of the business premises
h). Partnership Deed (in case of Partnership Firms)
i). Memorandum of Association and Articles of Association (in case of a Private Limited Company)
4. The verification process follows the application where local VAT authorities inspect your business premises at a time prescribed by them.
5. Pay the VAT registration fees once the inspection is over. The following is the fee structure:
a). VAT Registration Fee: Rs 500
b). Professional Tax:
i). Proprietors: Rs 1000
ii). Partners: Rs 1000 for each partner
iii). Private Limited Company: Rs 2500
c). Fee based on your turnover:
i). Rs 0 – Rs. 2,00,000: Rs 2,000
ii). Rs 2,00,000 – Rs. 10,00,000: Rs 3000
iii). Rs 10,00,000 – Rs 25,00,000: Rs6000/-
iv). Above Rs 25,00,000: Rs. 10,000
6. Once the verification and payment processes are over, you are provided with the Taxpayer Identification Number (TIN) immediately and the VAT Registration Certificate issued the next day or within a week by post.
How will it help?
VAT is a mandatory tax to be paid by all business organizations and it is one the primary taxes that add to the country's revenue and economy. Registering for a VAT ID is a piece of cake. And there are no worries of paying under the table incentives for the registration or verification process. The fee is fixed. So, go ahead and register yourself for a VAT ID and pay towards the country's as well as your business’s prosperity.