1. What is VAT?
A. Unlike the name suggest, VAT is NOT a tax on the margin of the business. VAT is a Consumption Tax, meaning, tax on consumption of goods by the consumers. VAT is to be borne by the consumers.
2. What is the similarities and differences between Sales Tax and VAT?
A. Both Sales tax and VAT are Consumption tax. To take an example, if a consumer consumes a goods worth Rs. 100 on which tax rate is 10%, the objective of both the system is to collect Rs 10 (i.e. 10% of Rs 100) to the Government. Both are Indirect Tax, meaning the consumer does not pay the tax to directly the government, but to the business from whom he has purchased the goods. The business remits it to the Government.
In Sales tax, the entire tax collected from the consumer by the dealer is paid by one of the dealer (out of the chain through whom the goods have passed). Chain meaning Chain of business comprising of Manufacturer -Wholeseller – Intermediate – Retailer etc. To take the above example, the said tax of Rs. 10 would be collected from one of the person in the chain, it can be the manufacturer or Wholeseller or the Retailer (depending on the type of Sales tax system in the State). In VAT system, the same Rs 10 would be collected in installments from every dealer in the chain. Each dealer will contribute a portion of the tax in proportion to his margin of operation.
3. Does VAT System increase the incidence of Tax on consumer?
A. No. The tax incidence remains the same.
4. Will VAT system complicate the Book of Accounts to be maintained by the dealer?
A. No. On the Other hand, it will simplify it. A dealer is expected to maintain two registers. Sales Book and Purchase Book. In Sales Book, he would record chronologically sales made and tax collected from the purchaser. In Purchase book, similarly, he will record purchases made and tax paid on such purchases.
5. How will the Net Tax payable be calculated?
A. First, the ‘Output tax’ is calculated from Sales Book by adding the tax collected from the consumer in respect of sales made in the quarter. Then ‘Tax Credit’ is calculated by adding the tax paid on purchases made in the same quarter. The Net tax payable is the Output Tax minus Tax Credit. If this value is negative, dealer gets a refund from the department in that quarter.
6. What kind of purchases are eligible for Tax Credit?
A. All business inputs, be it raw material, capital goods, computer, record books or anything which is used by the dealer to conduct his business. However there are two exceptions. Tax Credit can-not be availed in respect of purchase of items used for conducting business of Exempt items. Also there is a list of ‘non-creditable purchases’ specified in the Seventh Schedule of the A.P. Goods Tax Bill.
7. What is the implication of reduction of CST to zero, as announced by the Chief Minister?
A. It means that if a dealer in Arunachal Pradesh makes a sale to a dealer outside Arunachal Pradesh, no tax will be charged by the Government of Arunachal Pradesh. In addition, if any tax is paid on inputs to produce or trading of the said item, it will be eligible for tax credit.
8. Is any declaration Form required for claiming zero CST for interstate sales?
A. Yes. Sale can be made against any CST declaration form such as C-Form, F-Form, H-Form etc.
9. What is Entry Tax? Will it not make purchases of a dealer in Arunachal more costly?
A. Entry tax is a tax levied on all imports into Arunachal. It is levied on all importers, (whether dealers or consumers) so long as the value of goods imported is more than Rs. 10,000. This entry tax levied is fully VAT-able, i.e., a dealer making resale of such goods or use of such goods in his business, can claim full tax credit of entry tax paid. Thus Entry tax will not be an additional levy on the business, but on the other hand will protect the Arunachal business from the dealers of Assam, who make direct sales to consumers in Arunachal Pradesh. It gives level playing field to honest tax complying dealers.
10. Will Entry Tax not cause hindrance in movement of goods at the borders?
A. Mostly No. The importers will be expected to pre-pay the entry tax due at the Starting locations itself (such as Guwahati) before commencement of movement of goods, and carry the proof of payment. If the goods are imported through ‘Approved Road Transporters’, entry tax can be pain in Arunachal before taking the delivery of the goods. Such vehicles can pass across the borders without stopping.
11. I make purchases on Inter-state basis. Do I get credit of CST charged on such purchases?
A. No. CST has been charged by the state of origin, and hence, Arunachal government will not give any credit on account of tax charged by the other State Governments.
12. Is Registration compulsory?
A. No. Registration is compulsory only to dealers whose turnover in the year exceeds Rs 5 Lakhs. For other dealers, it is optional.
13. Can VAT system work on items where MRP inclusive of tax is prescribed?
A. Yes. MRP can be inclusive of tax. Tax component and tax exclusive price can be calculated by applying tax fraction [r/(r+100) where r is the tax rate] on the MRP.
14. Will dealers be allowed to sell their goods without charging sales tax separately ?
A Dealers can include tax on the sale price.
15. How will MRP mentioned on the goods be calculated in the VAT system ?
A. MRP can be inclusive of tax and tax can be calculated by applying tax fraction.
16. Will Central sales tax be abolished ?
A. Central Sales Tax Act will not be abolished because it is required for documentation of Inter-state sales. However, for Inter-state sale made from Arunachal, the CST rate (against C form) shall be zero. (Presently this rate is 4%)
17. Will first point tax end ?
A. Yes, the first point tax would end.
18. Will the entry tax applicable be collected at the State borders ?
A. Normally, entry tax will not be payable at borders. It is to be paid by the importer before he receives delivery of goods. We propose to install Facilitation Counters at rail, roads and airports to provide additional avenues for tax payment.
19. Would entry tax have an negative impact on the imports to the state ?
A. No, entry tax just ensures levy of tax on all goods coming into Arunachal. It does not make imports difficult; on the other hand, it gives level playing field to honest tax complying traders.
20. Would there be uniform tax rates across the states implementing VAT ?
A. Tax system should be such that no trade diversion takes place despite tax differentials. There may exist some differential tax rates for each state implementing VAT. Uniform tax rates takes away the leverage of states to optimize their revenues.
21. Is the tax rate going to be the same all over India ?
A. Yes with minor variations.
22. Are the tax rates the same for all items ?
A. There would be two basic slabs of 4 percent 12.5 percent in which most of the goods will get covered. Apart from this a very few items shall have 1% and 20% tax rate. Essential items like foodgrains etc. shall be exempt.
23. Can dealers below the threshold register ?
A. Yes, Voluntary registration is available.
24. Will RC No. of purchasing dealer be required to be recorded for each transaction?
A. For retail/consumer sale, details of purchaser is not required. Sale to registered dealers, which are to be covered under tax invoices, name and address of purchasing dealer has to be recorded.
25. What if the total sales in the quarter are less than the purchases (and stocks are carried forward in the next quarter)?
A. You can carry forward the net credit in your favour to the next quarter.
26. What if my total tax liability on outputs is less that the tax levied on purchases?
A. You can claim refund after each return.
