TNVAT: 11 FAQs on TNVAT (Tamil Nadu VAT) Answered by Tax Experts

TNVAT: A complete guide to the VAT in Tamil Nadu

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1. TNVAT: Introduction

The TNVAT Act or The Tamil Nadu Value-Added Tax Act came into effect from the 1st of January, 2007 and is intended to consolidate and amend the law pertaining to the levy of tax on the sale or purchase of goods in the confines of the state.

Given how the state has had an illustrious history in having introduced the first all-encompassing VAT regime, the state has come a long way in homogenizing the TNVAT law ever since its inception.

Section 2(49) of the Act defines VAT to mean a tax on sale of goods at every point in the series of sales by the registered dealer with the provision of credit of input tax paid or payable at the previous point of purchase.

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The TNVAT website

2. TNVAT: Who is liable to pay VAT?

Section 3 of the aforesaid act states that tax incidence will fall on

(i) every dealer whose turnover is not less than rupees five lakhs in a given year, and

(ii) a casual trader, agent or non-resident dealer, whatever be his total turnover in a year.

However,  every such dealer is whose total turnover in respect of purchase and sale within the state for a year is not less than Rs 10 Lakhs will also be liable to pay tax.

 Those goods which find mention in Part B or C of the First Schedule are prescribed specified rates therein.

As for second and subsequent sale of goods purchased within the State, every such dealer whose total turnover in a year is less than Rs 50 Lakhs may exercise his discretion to avoid paying the rates specified in the Schedule and instead pay a tax on his total turnover at a rate not exceeding 1% within 30 days from the date of commencement of the Act.

He nor a dealer purchasing goods from him is entitled to input tax credit on the goods so purchased.

The 2006 Act envisages self-assessment only subject to scrutiny of minimum of 20% in a year.

3. TNVAT: Method of determining tax liability

The VAT is essentially a multi-point system where the tax recovered on local purchases from the registered dealer can be subject to set off against the tax payable on the sale of goods.

The liability here is determined using the multiplication method.

The method works in the following manner –the taxable turnover of a dealer for a particular period is multiplied by the rate of tax applicable to that turnover.  This is referred to as Input Tax Credit method in  commercial parlance.

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4. TNVAT: Rates of applicable tax under VAT

The TNVAT rates are in the order of:-

(i) 1% such as bullion, noble metals, precious stones, worn-out jewellery etc.

(ii) 4% for acids and chemicals of all kinds, agricultural implements, bamboo etc.

(iii) 12.5% for all goods other than those that are exempted in 4th Schedule and those specified in 2nd Schedule and Part A and Part B of the 1st Schedule.

However there are special rates are earmarked for certain goods,e.g. petrol, which are outside the ambit of VAT. For these goods, one cannot avail input tax credit.

5. TNVAT: Who is a Dealer?

The Tamil Nadu VAT Act defines dealer as a person who purchases, sells, supplies or distributes the goods in the course of his business for valuable consideration.

They include any local authority, a company, casual trader, any person who effects transfer of property in goods other than by way of sale, hotels, restaurants,Customs department, insurance company, corporation or companies of state and central governments, etc.

Refer Section 2(15)of the Act, accessible HERE to see if you qualify as a dealer.

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The registration involves money, of course

6. TNVAT: Registration Modalities

There are principally four categories of dealers who are to obtain registration from the Head of the Assessment Circle in whose jurisdiction the dealer’s principal place of business is situated.

To begin with, those dealers whose total turnover in respect of purchase and sales is not less than Rs 10 Lakhs for a year are to get registered as per the mandate of the Act.

For those dealers whose total turnover is not less than Rs 5 Lakhs are also to be registered.  Lastly, those dealers who intend to commence the business, on option as well as casual traders, agent of non-resident dealer and dealers in jewellery irrespective of quantum of turnover shall also obtain registration.

So far as registration fees are concerned, the principal place of business attracts a levy of Rs 500/- while every additional place of business exerts a burdensome Rs 50/- such as for branches, godowns.

There is no necessity of paying security deposit for dealers while the registration is permanent subject to cancellation by the Department or on stoppage of business when reported by the dealer.

Renewal of registration has become a thing of the past with the 2007 Amendment Act.

The registration authority upon acknowledging the receipt of application filed by the dealer will issue a certificate of registration within 30 days from the date of receipt of application.

The Commercial Taxes Department also provides for e-services that can be accessed at www.tnsalestax.com, www.tnsalestax.gov.in, or www.tnvat.gov.in.

This procedure is distinct and separate from the procedures for registration under the Central Sales Tax Act, 1956.

7. TNVAT: Proof of Registration-TIN Number

Every dealer here is allotted a registration number known as the TIN or the Taxpayer Identification Number. The TIN is an eleven digit number to be quoted in all VAT transactions and correspondence.

As per the TNVAT the allotment of the TIN extends also to those dealers who were registered with the erstwhile Tamil Nadu General Sales Tax Act, 1959 without charging any fee.

But such dealers will have to immediately file an application for obtaining registration under VAT. Applications can also be made online HERE.

Every company including its branches within the state is to be assigned only one TIN and as for conglomerates, a separate TIN should be assigned to each separate legal entity.

Need VAT or Sales Tax related application, filing, advice?

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8. TNVAT: Filing of returns

There are separate forms to be filed on a monthly basis by general assessees and exclusive re-sellers.

The said returns are to be filed on or before the 20th of every month for the transactions which took place in the previous month along with proof for payment of tax due from the dealer.

According to the TNVAT regime the dealer here is liable for assessment to tax only if the total turnover for the financial year exceeds the minimum threshold of Rs 5 or 10 Lakhs specified under the 2006 Act.

In respect of those dealers whose turnover exceeds Rs 200 Crores in the previous year, the due date for filing the monthly returns in the relevant form is on or before the 12th of the succeeding month with proof for tax payment.

Late or submissions with defects will attract penalty and interest payments as per TNVAT law.

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Get your VAT filing done via vakilsearch

9. TNVAT: What is the mode of payment of tax?

Every dealer can choose to pay tax by remittance to a State Bank of India branch or any bank authorized by the government from time to time, or by remittance in cash into a government treasury, assessing authority.

He can also avail the facility of a crossed cheque in favour of the assessing authority or a crossed demand draft or banker’s cheque.

10. TNVAT: Input Tax Credit

How can I claim input tax credit under the Tamil Nadu VAT or the TNVAT regime?

Given how an input tax credit is to be adjusted against the tax payable by the purchasing dealer on his sales, there are certain conditions and restrictions on availing such credit.

They are to be claimed only on the basis of original purchase tax invoice issued by registered selling dealer.

However, even if such an invoice were to be lost, input tax credit can still be claimed on the basis of duplicate/carbon copy of the invoice obtained from selling dealer.

As for goods damaged in transit, destroyed or lost, returned, purchase from outside the state and sale of exempted goods, these transactions are not eligible for input tax credit.

11. TNVAT: Appeals mechanism

Any such dealer who is aggrieved by the order of the Assessing Authority can make an appeal before the Appellate Assistant Commissioner concerned.

In respect of orders passed by the Fast Track Assessment Circle, the appeal should be made before the Deputy Commissioner (CT)(Appeals) within 30 days from the date of receipt of assessment order. One needs to be mindful that for any appeal of his to get admitted, he has to furnish the tax admitted and 12.5% of the impugned tax.

From here, the appeals hierarchy extends to the Sales Tax Appellate Tribunal within 60 days from the date of receipt of the appeal order. Against the orders of the Sales Tax Appellate Tribunal, the dealer can prefer an appeal before the Madras High Court.

Section 22, 26 and 27 of the 2006 Act confer the powers of revision upon the Deputy Commissioner (CT) where provision for first appeal has no force. The Joint Commissioner is also vested with the powers of revision in some  circumstances as have been defined in the TNVAT Act.

Need VAT or Sales Tax related application, filing, advice?

Fill the form on the right and our Tax experts will get in touch with you.

HOW IT WORKS

Devaditya Chakravarti