Resources for Small Business

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

  1. 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.
  1. 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?

  1. 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.
  1. 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

  1. 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.
  1. 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.
  1. 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?

  1. Incorporation Certificate of Company (in case of Companies)
  2. MoA & AoA (in case of Companies)
  3. Particulars of people involved in the firm.
  4. Address Proof of Director – Lease / Rental Agreement
  5. Company PAN Card / Individual PAN card in case of Proprietorship
  6. ID Proof of Director – Pan Card / Election Card/ Passport/ Driving License
  7. Rental Agreement/ Lease Agreement of Company / Proprietorship
  8. In case of Partnership firm- Partnership Deed
  9. Passport size Photograph of Director of the firm.

    Information Required from you

  1. Name of the Dealer
  2. Name of The Company
  3. Postal Address
  4. Telephone No
  5. EMail Address
  6. Details of Director/ Managing Director/ Partners / Proprietor – Address,Ph.No, eMail ID
  7. Details of Authorized Signatory
  8. PAN No of Partnership firm
  9. Date of Commencement of Business
  10. Date of Birth / Date of Incorporation – (in case of Company)
  11. Nature of Business
  12. Commodities description
  13. Bank Account details
  14. List of Directors (in case of Companies)
  15. 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.

VAT/CST/TIN  registration, E-commerce,

Delhi VAT Registration Page

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 2. While submitting Online you have to pick  the Local Vat Office Number which  be based on PIN code of the                   locality where the Company / Office situated.
VAT Registration

Karnataka VAT Registration Page

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

VAT Registration Maharashtra

Maharashtra VAT Registration Page

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!

Happy selling!!


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Divya Sharma Dixit

Divya Sharma Dixit

Divya Sharma Dixit: Electronics and Communication Graduate bitten by the StartUp Bug.
From being an Engineer to a Journalist to Business Development officer and now Marketing, she always is on her toes. She takes life as it comes.
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  • Hi Vivek, it would be best if you consult a professional CA or a firm for this.

  • Joy Roy

    Hi …I have a ecommerce set up currently in Kolkata. If I like to replicate same set up here dose it mean that I need to have trade licence, VAT/CST registrations again here in Delhi? Whats the approximate cost for these legal compliance’s? Please consider the fact that I’m living in a rented property here.
    Please advise.

    • Hi Joy, thanks for getting in touch. VAT and trade license are state registration and you will need to get it from Delhi. CST is a central government registration and you need not register for it again. For the charges for these registration services, we do not provide these services and hence won’t be able to provide you with a cost. However, you can get in touch with VakilSearch for a quote for these.

  • Anil Patel

    Hi I m a new seller on ecommerce platform and my sell is very low in this quarter .

    1) may I submit my return in every quarter
    2) is their any way I will submit it myself online directoly without any CA help
    3) is CA required to submit my return ???

    • Hi Anil, thanks for getting in touch with us. It will be best if you could approach a qualified CA for answers to these questions. You may also get in touch with VakilSearch.com for this.

  • Hi Joydip, it would be best if you can get in touch with a Chartered Accountant or VakilSearch for this purpose.

  • Ashish

    Dear Sir,

    I had register for VAT and CST in 2012 and allotted the no. also ,
    Because of Expiry of DD of 25000 it was return to me for submitting the
    new DD of 25000 but due to some financial problem, i wasn’t submitted it
    again. Now i want to start the company again. If i will submit the DD
    of 25000, can I do the business on Same allotted CST and VAT No. ?

    Please reply….

    • Hi Ashish, you need to get in touch with your CA or a firm that specializes in taxation issues. You may also get in touch with VakilSearch for a resolution of this issue.

  • Hi Aman, for e-commerce taxation purposes, it would be best if you get in touch with a tax filing agency or get in touch with ClearTax.in.

  • In regards to VAT – Every trader is required to get a Compulsory Registration (also called regular registration) on reaching a certain turnover. However, you can also voluntarily register before the turnover threshold has been reached. There are certain benefits to both the registration.

    In regards to CST – Any trader effecting an interstate transaction is advised to get a CST registration done.

    We would suggest that you talk with a professional such as a CA or a Lawyer to understand all the details regarding this.

  • ashik

    Hi Team,very informative website, i liked very much. my question here is, i dont have VAT license, but Im planning to sell the food product to small stores / whole sale stores, but product is manufactured by some other company, apart from this the income will not cross the 5lac threshold, can i print in product label as manufactured by “original manufacturer name” and marketed by “my name”, do i need to apply for VAT / some other registrations, Please suggest with details – location tamilnadu.

    • Hi Ashik,

      You will not require a VAT registration for this. If you are shipping the product across state boundaries, you should check if any state tax is to be paid for the same.

  • Hi Vyom,

    Unfortunately, we do not have much expertise when it comes to specific state rules for VAT registration. You can reach out to vakilsearch.com who can give you better information about that.

  • 1) You should not have a problem with that (but please check with a registration and taxation lawyer to be safe).
    2) Ideally, a TAN number is only required by law for turnover more than Rs. 5 lakh per annum. However, all the popular online marketplaces like Flipkart, Amazon, Snapdeal require a TAN number to ensure seller quality and to root out fraudulent sellers.
    3) You would not need to surrender the your Service tax or TAN number. It will be linked to your company for lifetime. What you can do is register a company and apply for VAT/TAN numbers. You can run the e-commerce business as a part of your larger company. This way, you can close down the company whenever needed.
    4) Regarding specific state policies, we do not have much information unfortunately.

  • Nikhil Garg

    hello
    we are planning to run e commerce business along with alternate channels like amazon etc in delhi. Do we need to have two separate registration under vat..one for ecommerce(Form ec1) and other for alternate channel as a dealer..

  • Hi Dinesh,

    For opening any normal business in India, you only need VAt when the turnover is more than Rs. 5 lacs per annum. However, Ebay (and other online marketplaces like Flikart, Amazon, etc) require you to have the business registered and a VAT certificate if you want to sell on their platform, irrespective of your business. If you are planning on selling the products through Ebay or any other marketplaces, they will require you to have a valid VAT certificate.

    Instead, what you can do is sell the products on your own website. This will give you more control and you need not register the business just yet.

  • Hi Dinesh,

    You can buy any products from Alibaba. But to sell products on EBay in India, you will have to get the company registered and obtain a VAT certificate.

  • You do not need VAT registration for annual turnover less than 5 lakhs. Happy selling!

  • Hi Sapana,

    If your turnover in a year is less than Rs. 5 lakhs, you can start selling without any VAT/TIN number on your own website. However, if you are selling on an online marketplace, VAT/TIN numbers will be required for the same, irrespective of annual turnover.

  • Registeropc

    Nice article. Value Added Tax (VAT) Registration is a tax registration required for businesses trading or manufacturing goods in India. A taxable person is liable for VAT after turnover of his/her business reaches the threshold prescribed by the relevant state VAT legislation. Most states require VAT registration when the turnover of the company exceeds Rs.10 lakhs per annum. Get more information in this site http://www.dobizindia.com/sales-tax-vat-registration/

  • Hi Raj Kamal,

    I would strongly urge you to consult a CA or Taxation lawyer to answer these queries. We are not experienced enough to provide this advice. You can also get a consultation from http://www.vakilsearch.com if you do not have a CA at hand.

  • Hi Arjun

    The cost of VAT Registration have been mentioned but further details can only be procured when your selling state is known to us.

    Hope this helps

  • Surabhi Keni

    Hi Divya,

    Very useful information 🙂 and and easy to understand explanation !
    Thank you so much

    • Hi Surabhi

      Thank You 🙂

      Keep reading.

  • Hi Ajay

    You need to check with your state’s VAT limits in order to know what the threshold is. If you fall under that then you can go ahead and start selling without registering for VAT. Also if you are selling to interstate i.e you customer base is interstate, you need to register for CST

    Hope this helps.

  • Hi Jay

    1. The website for Maharashtra VAT is

    http://mahavat.gov.in/Mahavat/HomeController?login=login

    Here you can find all the exemptions and rate of Vat for various products.

    2. For a more detailed understanding of how VAT, CST and Service Tax work you can refer to the following blog

    http://www.zepo.in/blog/2015/08/21/everything-that-you-need-to-know-about-vat-cst-and-service-taxation.

    3. Unless you cross the threshold, you do not have to register or pay VAT. You can apply for Voluntary VAT if you wish so.

    Hope this helps.

  • Hi Sam

    VAT/ CST registration is to be done from the state where your business is in. Because Delhi VAT DVAT has separate rules and you will be shipping from Delhi to other states hence you’ll be required to register with DVAT as it is state bound.

    Hope this helps

  • Hi Vipul

    For you to be able to run your business from your rented space, you’ll be requiring an NOC from your landlord.

    Hope this helps.

  • Hi Vipul,

    You can register for VAT/CST in Haryana and hence taxes of Haryana will apply to you, and not Delhi. Also, you don’t need to register for CST separately. When goods are shipped across borders, VAT is considered as CST.

    This should help you understand taxation a bit more: http://www.zepo.in/blog/2015/08/21/everything-that-you-need-to-know-about-vat-cst-and-service-taxation/

    Hope this helps.

  • Hi Ashish,

    In this scenario, VAT/CST or ST will depend on what you are selling on commission basis. If you are selling products on commission, you’ll still need VAT or CST, coz the commodity traded is a product. Likewise, if you are going to moderate services, then you’ll need a service tax.

    Also, you get a VAT/CST registration only on the basis of a shops and establishment certificate. and you can draw an S&E on your home address or your commercial address however that suits you.

    Hope this helps.

  • You’re most welcome, Rehaan.

  • Hi Manikandan,

    1. For starting any business , you need a valid license like License under Shop and Establishment Act (Basic) or Incorporation Certificate for Companies, etc

    2. TAN no. is not mandatory for Sole Proprietors unless your turnover in the previous financial year exceeded 1 crore.

    3. Service Tax Registration is applicable only for Service Providers only. If during a financial year your company crossed 9 lakhs in turnover for service provided, then registration is mandatory within 30 days.
    And Service Tax is to be paid on the amount exceeding 10 lakhs. This exemption limit of Rs 10 Lakhs applies only for the first year and from second year onwards service tax has to be paid on all amount received towards taxable services

    4. VAT is mandatory when the gross turnover exceeds 5 lakhs. However for imports registration is mandatory when it exceeds 1 lakhs. VAT has to be charges on the imported products as well as per the VAT schedule.

    5. Other licenses required for Proprietorship are Profession Tax or any business specific licenses (Say if Food industry then, License under FSSA). As such for general business only these are the required.​

    6. IEC is mandatory if you are shipping internationally. And for which, the pre-requisite is a registered firm.

    Hope this helps.

  • Hi Rehaan,

    Apologies for a delayed response.

    The Basic difference between Voluntary and Regular or what you can also call as compulsory VAT Registration is that
    You do a voluntary VAT Registration for your company to be recognized. You do not have an obligation of getting registered and it is understood that your turn over does not cross threshold limit but you yourself want to opt for VAT registration. So you can redeem the set off limit as well while setting up a machinery plant if your business is in that domain.
    Additionally an added cost of deposit is required for voluntary registration and 5000 as registration fee which is 500 for regular one

    The regular or compulsory VAT registration is for those companies whose turnover is about to cross or has crossed the threshold limit in a financial year. So if they don’t get it done they are penalized by the Government. The cost of compulsory is 500 with no deposit because it is understood that they have a turnover above threshold.

    So now if you see our customers, they perhaps do not have a 5 lakh turnover but for shipping or for listing on marketplaces they need a VAT/ TIN number, so they have to get voluntary registration done.

    Hope this helps.

  • Glad to be of help Chaitanya!

  • Hi Chaitanya,

    Please find our answers below:

    1. The VAT registration can be applied for anywhere in India. It is applicable Pan India, irrespective of the city it is applied in. Also, the inter-state shipping will be taken care of by CST. VAT is tax for intra-state deliveries. And CST is for inter-state. You don’t have to apply for a separate registration for CST.

    2. The Tax inspector comes to just cross check the information provided. Nothing to worry about.

    Hope this helps.

  • Chaitanya Upadhyay

    I am trying to link my e commerce website with Fedex, But they have asked for a VAT number.
    I dont have a VAT number yet nor my business has reached a 5 lacs benchmark.

    What to do?????

    • Hi Chaitanya,

      We’d suggest you get in touch with FedEx for the issue, since they’ll be the best people to give you a workaround for that situation. Let me know how that works out for you?

  • Glad to be of help! Look forward to having you onboard.

  • Hi,

    So it is not mandatory that one has a VAT/CST/TIN number to sell in other places initially. However, for the purpose of smooth shipping, we recommend you to get this number sometime down the line.

  • Thank you Vidhi