How to file VAT Return?

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

  1. Download the sales/ Outward supply register from the accounting/ billing software used by the entity.
  2. 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).
  3. Classify the transactions further into local, export and supply under a reverse charge
  4. Each line item shall be classified into exempt, zero-rated, standard-rated and out of scope supplies.
  5. Cross check the total of taxable value with the relevant rate classification.

  1. Nominal supply attracting VAT.
  2. Add the amount of VAT tax payable on the receipt of advance to the liability ascertained above.

Reconciling Input tax credit

  1. Classify all the line items of inward supply into business and non-business.
  2. Break the input tax rate-wise into zero-rated, standard-rated, exempt and out of scope.
  3. 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.

  1. 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

  1. 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.
  2. RCM liability ledger to be maintained separately from the normal liability ledger.
  3. Reduce the total liability with the eligible ITC.

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