The Hindu Business Line : `New regime will ring in friendlier audits'

THE Kerala Value Added Sales Tax Bill 2002 will seek to ring in a system in which the resort to surprise raids will be exchanged for friendlier `VAT audits' to be conducted by a team of two or more tax officials at the business premises of the dealer after providing the latter with advance information.

This was the highlight of a presentation on `Familiarisation of Value Added Tax' by Mr R. Krishnan Kutty, Deputy Commissioner, Commercial Taxes, at a seminar on the Kerala Value Added Sales Tax Bill 2002 organised by the Department in association with the Centre for Taxation Studies (CTS).

VAT Audit is taken to mean the visit to the premises of the registered dealers to test the credibility of the returns and the declared or self-assessed tax.

Audit does not mean inspection of the business place. It is carried out as part of regular visits and with advance information to the dealer.

The audit will help traders to rectify computational mistakes and enable them pay up only what they need to at the right time.

The Bill also provides for pre-registration visits by officers to assist dealers to furnish correct information, properly and correctly file returns and pay tax.

Assessment is ordered only in cases of proven attempts at non-declaration, under-declaration or evasion of tax.

VAT does away with the system of annual or otherwise routine assessments.

It is a self-assessed tax by design, payable monthly or quarterly.

Dealers opting for presumptive tax need file quarterly returns and pay the tax accordingly.

Dwelling on effect of exemption under VAT, Mr Krishnan Kutty warned against the proclivity to claim exemption to `a person' or `class of persons' under the system since it could prove counter-productive.

Dealers claiming exemption will not be eligible for input tax credit.

Likewise, dealers purchasing goods from another who is exempted will not be eligible for input tax credit.

In fact, the purchasing dealer would be liable for full tax liability without input tax credit.

All registered dealers other than those opting for presumptive tax have been categorised as VAT dealers for the purposes of the Bill.

Dealers opting for presumptive tax should (i) have an annual turnover of Rs 2 lakh and above but not exceeding Rs 5 lakh (ii) not be registered under the Central Sales Tax Act and (iii) not have to deal with the `first sale' of taxable goods.

New definitions for input tax, output tax and `reverse tax' have been provided in the Bill.

Reverse tax is that portion of input tax of the goods for which input tax has been availed, but where goods are subsequently used for any purpose other than resale or manufacture of taxable goods or execution of works contract or use in containers or packing material.

More than 120 countries have adopted the VAT regime so far.

The VAT regime goes beyond the traditional realm of `movable goods' to bring `services' too within its scope.

Mr Krishnan Kutty said that this was why the word `supply' (of goods) has been deliberately added in the definition of value-added tax in the Kerala Bill, which now reads: "Value-added tax is a tax on sale (supply) of goods with provisions for rebate of tax paid (input tax) on the purchase (acquisition) of the goods for resale or use in manufacture/production of goods for sale".

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`New regime will ring in friendlier audits'