VAT in Tamil Nadu
Before proceeding how VAT works in Tamil Nadu let us try to understand, what VAT is and what is the mechanism for levy and collection of VAT.
Value Added Tax (VAT) basically is tax levied on value added to the commodity. At each level of sale, the seller/dealer levies and collects the tax on sale and claims a credit on purchases made. Needless to say, the balance is paid to the government. VAT is an indirect tax and the final taxes are borne by the ultimate consumer.
This tax is levied by the state government, hence considering the demography and uniqueness of every state, the VAT laws differ state wise.
Now on understanding the basics of VAT let us move towards understanding how it works in Tamil Nadu.
The VAT Act extends to the whole of Tamil Nadu. In Tamil Nadu registration is mandatory for any dealer (irrespective of type of business entity) to obtain VAT registration if the sale and purchase of goods within the state in any year is greater than or equal to Rs.10 lakhs. Also if the total turnover in a year is greater than or equal to Rs.5 lakhs, then the person or entity must be registered. Irrespective of the quantum of turnover, Tamil Nadu VAT registration is mandatory for:
- Jewellers or Bullion Traders
- Factors, Brokers, Commission Agents
- Mercantile Agents
- Non-Resident Agents or their Principal
- Dealers making purchases against C Form
In addition to the above, any person wishing to commence business in Tamil Nadu can suo moto acquire Tamil Nadu VAT Registration. The entire process takes about 15 to 20 days as it does involve physical verification of the premises as well.
TIN (Tax-Payer Identification Number) is issued to registered dealers. TIN is a unique number allotted by the State Government’s Commercial Tax department to dealers registered under VAT. The first two digits of the TIN Number represent the State of Registration. Thus, for Tamil Nadu, it shall be TN. TIN number must be quoted on all correspondence in relation to VAT registration, return filing and other correspondences.
VAT rates are based on commodities that fall under the respective parts of schedule I. There are 3 parts, namely Part A, B, C. The following is the Tamil Nadu VAT rate for each category-
- Items mentioned in Part A of Schedule I are taxed at 1% – (i.e, Gold, Silver, Precious Metals, Jewellery, etc.)
- Items mentioned in Part B of Schedule I are taxed at 5% (i.e, Utensils, Coffee beans and seeds, computer stationary, pipes, printed materials like diary & calendar, etc.)
- Items mentioned in Part C of Schedule I are taxed at 14.5% (Air conditioners, bakery products, cement, cosmetics, dry fruits, electronic toys and games, etc.)
It shall be noted that there are certain goods on which VAT is exempt like bread, candles, chillies, garlic, etc.
VAT returns ought to be filed on a monthly basis. The due date is 20th of the succeeding month. However, if the taxable turnover in the previous year is above Rs.200 crores, then the due date is 14th of the succeeding month.
As it is an indirect tax, here the customer pays the tax, however the onus is on the registered dealer to collect this tax and remit the same. In order to avoid any penalty or interest, this process should occur before the due date.
The payment has to be made on or before 20th of the succeeding month. However, if the taxable turnover in the previous year is above Rs.200 crores then the due date is 12th of the succeeding month.