VAT Registration:- Simplified
Every business-man/ woman or an aspiring business-man/woman who wants to sell online often comes across the word “VAT Registration”. People often get confused so as to if they should get one or not. Is it beneficial for them or not? If they want to get registered, then what is the procedure and documentation required? So many questions bothering you. So here we are, we’ll simplify it to you so that you can easily sail through this process.
In this blog we’ll answer all your queries one by one.
Starting with what exactly VAT is.
VAT as I mentioned before is “Value Added Tax” or the Sales Tax that is to be paid to the government for any sale that is made. But the catch is, unlike income tax this tax is not deducted from your pocket. This tax is paid to you by the customer and you pass it on to the Government.
So for example you are selling online something at ₹100 and the Sales Tax in that state is 10%, then the total amount levied on the customer will be ₹110 of which ₹100 you can keep and ₹10 goes to the Government. There are various taxation by the Government. VAT is one of them.
VAT is an indirect taxation
So basically Sales Tax is of two types
- VAT (Value Added Tax)- If the Goods are purchased and sold in the same state, then VAT is applied on them and this goes to State Government.
- CST (Central Sales Tax)- If the goods are purchased or sold between two different states, then CST is applied and this goes to central Government.
Who needs a VAT Registration?
Anyone who sells anything , be it goods, products or anything that can be felt or touched then you require a VAT registration.
In India if the turnover of your (that is you are a entrepreneur) business is more than ₹5 Lakh in a year (₹10 Lakh is some states), then you need to have a VAT Registration.
Also if your business is involved in purchasing goods that have been levied with VAT, then it is advisable that you go for a registration or else you will have no way to claim the VAT that goes from your pocket.
If you are dealing inter- state then it becomes mandatory for you to have CST Registration if in case you do not want any hassles in the logistics.
Why is a VAT Registration beneficial for you?
If someone comes up to you and asks what proof do you have to prove your identity? What will you do in such a case?
Pull out your driving license or voter ID? Why? Because they are Government issued Identity – Cards for you. Similarly VAT registration is also one of the Government proof of your business. It makes your customers and other entrepreneurs more confident about the authenticity of your company and makes you a reliable entrepreneur as well. This is the biggest benefit that VAT Registration brings along. Plus any day if your turnover crosses the threshold limit, you have to register for it. But it is always advisable to do it before hand because a very high penalty is issued if in case your turnover crosses the threshold. And as we say prevention is always better than cure. And why wait for the Government to penalize you? Let us get started now!
What benefits do you have if you have a VAT Registration?
- Whoopie!! You are a recognized company– There will be a certain authenticity associated to your company and other entrepreneurs will be more comforted in doing business with you. This is a surety on your part that yes legally you are a sorted company.
- You get to use Set off– So firstly what is set off?
Set – off is the difference of the VAT you give to your supplier and the VAT you receive from your customer. So in simpler words VAT for a particular product has to reach the Government only once. So if you paid some VAT you can deduct it from what your customer gave you.
Set off- |Vat you paid – Vat you received| – Payable to Government
- A VAT registration implies that your business turnover is more than 5 lakh INR. So it makes your company appear established and larger. That will further appeal to more entrepreneurs and help you expand.
- You become eligible for VAT refunds. This means that you can claim the taxes you have paid in an European country while you buy any goods there.
- You can easily see your VAT status or dealer status just by punching in your VAT number. This removes all hassles of going through all set of documents or receipts that when last VAT was paid.
What documents do you require for a VAT Registration?
- Incorporation Certificate of Company (in case of Companies)
- MoA & AoA (in case of Companies)
- Particulars of people involved in the firm.
- Address Proof of Director – Lease / Rental Agreement
- Company PAN Card / Individual PAN card in case of Proprietorship
- ID Proof of Director – Pan Card / Election Card/ Passport/ Driving License
- Rental Agreement/ Lease Agreement of Company / Proprietorship
- In case of Partnership firm- Partnership Deed
- Passport size Photograph of Director of the firm.
Information Required from you
- Name of the Dealer
- Name of The Company
- Postal Address
- Telephone No
- EMail Address
- Details of Director/ Managing Director/ Partners / Proprietor – Address,Ph.No, eMail ID
- Details of Authorized Signatory
- PAN No of Partnership firm
- Date of Commencement of Business
- Date of Birth / Date of Incorporation – (in case of Company)
- Nature of Business
- Commodities description
- Bank Account details
- List of Directors (in case of Companies)
- Details of the Company / Individual – in case of Proprietorship
Furthermore a detailed explanation of the VAT Registration Process in Major cities
VAT Registration Procedure For Delhi
For VAT Registration in Delhi
Step 1. Log on to www.dvat.gov.in and click on new registrations.
Step 2. Fill the form and upload the documents keeping in mind that they should be in.pdf format or.jpeg and less than 100kb.
Step 3. The Court fee of ₹1,025/- (w.e.f. 17.6.2014) for new registration is to be filled by you.
Step 4. You get a temporary registration number and once the verification is complete you can download the permanent number.
VAT Registration process For Karnataka
Step 1. Log onto vat.kar.nic.in/
Step 3. You will be allotted a person for verification who will do the physical verification.
Step 4. Apart from a nominal registration fees, a security Deposit would be determined by the VAT Inspector at the time of Registration based on the expected turnover which is refundable on surrender of the registration.
VAT Registration process For Maharashtra
Step 1. Log onto www.mahavat.gov.in
Step 2. Fill form number 101.
Step 3. Fee (to be paid in Challan 210)
For Regular- ₹500 and * no deposit*
For Voluntary- ₹5000 plus * ₹25000 Deposit*
Step 4. The documents have to be submitted and produced at the time of verification.
Hope your queries have been solved and the VAT registration no more seems a hassle to you.
Still have any other queries? Or want to tell us any more surprising facts about VAT?
Tell us if you are looking forward for us to share details for some other states!
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