The VAT Return Form is the official document summarizing for a given tax period, the total output tax due and the total input tax recoverable. The form is the same, whether a taxpayer is subject to quarterly tax periods or monthly ones.
Compiling outward liability
- Download the sales/ Outward supply register from the accounting/ billing software used by the entity.
- Break down each transaction into two categories
- for the purpose of the business
- not for the purpose of business (transactions undertaken for personal benefits of the employees and managers will usually fall under this).
- Classify the transactions further into local, export and supply under a reverse charge
- Each line item shall be classified into exempt, zero-rated, standard-rated and out of scope supplies.
- Cross check the total of taxable value with the relevant rate classification.
- Nominal supply attracting VAT.
- Add the amount of VAT tax payable on the receipt of advance to the liability ascertained above.
Reconciling Input tax credit
- Classify all the line items of inward supply into business and non-business.
- Break the input tax rate-wise into zero-rated, standard-rated, exempt and out of scope.
- Further, classify the inputs w.r.t the purpose i.e. input supply used for the purpose of making a taxable or exempt supply. (Both zero-rated and standard-rated outward supply falls under the ambit of taxable supply). If the input is used for the purpose of providing both taxable and non-taxable supply, the input tax incurred cannot be tracked against specific transactions then input tax will be claimed by using appropriate apportionment method to claim ITC.
- Check that VAT paid under RCM is claimed as input in the VAT return if it qualifies as eligible ITC as specified above.
Ascertaining Net Liability
- Cross check the liability appearing in the trial balance at the end of the VAT return period with the liability as calculated under the sales summary above.
- RCM liability ledger to be maintained separately from the normal liability ledger.
- Reduce the total liability with the eligible ITC.
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