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Concept of VAT

The essence of VAT is in providing set-off for input tax and this is applied through the concept of input credit/rebate. This input credit in relation to any period means setting off the amount of input tax by a registered dealer against the amount of his output tax. The Value Added Tax (VAT) is based on the value addition to the goods, and the related VAT liability of the dealer is calculated by deducting the input credit from the tax collected on sales during the payment period. This concept is explained with an example, in the Computation of VAT section. VAT works in two different ways:

    1. If VAT-registered businesses receive more output tax than the taxes paid as input, they will need to pay the difference to the Commissioner of Taxes (State).

    2. If the input tax paid is more than the output tax collected,

    o You can carry forward the Input credit and adjust it against the output tax in the subsequent months.

    o You can have the Input Credit refunded to you at the end of the current or following year, by the Government.

    o You can receive refunds for Input Credit on exports within a period of three months

The next few screen shot will show you how VAT is simplified by Tally 7.2.

Company Creation/Alteration

You can enable Tally VAT in the Company Creation/Alteration screen shown below.

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Husaini Information Systems
22/B, Sheetal Apts, Gunpowder St, Mazgaon, Mumbai - 10
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