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Friday, 16 February 2018

Value Added Tax

Value Added Tax

Value Added Sales Tax Information System (VASTIS) is an IT solution for the Value Added Tax (VAT) System. It is a software product which aims for the automation of the APVAST Act, which was passed in Andhra Pradesh state Assembly.
Value Added Tax is a tax that applies to all commercial activities involving the production and distribution of goods and the provision of services. It is a consumption tax, borne ultimately by the final consumer. It is charged as a percentage of prices.
It is collected fractionally, via a system of deductions whereby taxable persons (i.e., VAT-registered businesses) can deduct from their VAT liability the amount of tax they have paid to other taxable persons on purchases for their business activities. This mechanism ensures that the tax is neutral regardless of how many transactions are involved.
This project benefits the citizens with greater transparency, convenience, timeliness, responsiveness and lower overall costs. For the governments, the main benefits are the greater trust that the citizens will repose and the cost-savings achieved by these services. For the commercial organizations, the benefits will accrue from their effectively seizing the opportunity for some outsourced services and new marketing opportunities.
The Commercial Tax Department (CTD) is the largest revenue generator of the state, contributing over 60% of the state’s revenue, under eight different statues. However, of these eight, sales tax by itself contributes over 95% of the total taxes collected by the government.
The department administers sales tax collection through the Andhra Pradesh Govt. Sales Tax (APGST) act, 1957 and the Commercial Sales Tax (CST) Act, 1957. The Value Added Tax Act will replace the APGST Act, in 2002.
Currently, the Central Tax Department (CTD) operates at three levels, namely at the Head office, Division and at the Circle. There are 182 circles, spread across 21 divisions, the demarcation into divisions and circle is on the basis of revenue generation. Hence, the twin cities of Hyderabad and Secunderabad alone compromise of 5 divisions, with a total of 46 circles reporting into these divisions.
Value Added Sales Tax Information Systems (VASTIS) is an IT solution for the Value Added Tax (VAT) system. It is a software product, which aims for the automation of the APVAST Act, which was passed in Andhra Pradesh State Assembly.
VAT is the tax imposed by the government as a consumption tax where taxes are levied at each step of manufacturing process where value is added to that product at the point in manufacturing cycle as well as the point where consumer purchases the end product.
It is an Indirect tax, assessed on increments in the value of a product from raw material stage through the production process to the final sale. At each stage, the tax is levied on the amount by which inputs purchased augmented in value. The final, sale price will incorporate all of VAT payments along production chain.
It is collected fractionally, via a system of deductions where by taxable persons (i.e., VAT registered businesses) can deduct from their VAT liability the amount of tax they have paid to other taxable persons for their business activities.
Ø  Problem definition:
State of Andhra Pradesh is organized as having:
More than 100,000 dealers, who deal in 200+ different commodities.
182 different circles, handling VAT registration request, appeals, inspections, payments, returns & assessments.
21 divisions, dealing with registration authorization, audits, appeals & investigations.
Ø  Manual Processing Cost:
·   There are more than 60 notices to be generated for different processing requirements.
·   More than 80 forms per dealers.
·   More than one tax rate for 200+ commodities.
Ø  Doing these manually creates:
·   Delay in registration, processing & Intimation process.
·   Lack of customized information as per requirements information at the functional units of CTD (circles, divisions, check posts).
Ø  IT enabling the services:
Government of AP realized the need of hour is to IT enable the Tax Administration to maximize tax revenue by
·         Improving operating efficiency by empowering efficiency by automating the complex tax payable calculations.
·         Avoiding delays, by automating the workflow (acknowledgement-data entry-processing-decision making).
·         Improving dealer servicing using dealer friendly services at the time of registration return processing & interactions with CTD.
Ø  Simplicity:
In VAT there are only two main tax rates. So, Vat would be much easier to administer and comply with. The disputes relating to the stage of tax is another major area of litigating today, would practically disappear.
Ø  Adjustment of Tax paid on goods purchase:
Adjustment of tax today is restricted to the amount of tax payable with the no provision for refund or carry over of excess tax paid except in case of export of manufactured goods out of the country or sale to registered dealers.
Ø  Transparency:
The system of levy of sales tax at first stage is not transparent, as the amount of tax, which the goods have suffered, is not known at the subsequent stages.
Ø  Fair and Equitable:
As stated above, there would be uniformity in tax rates across the states and no unfair tax advantage to any under VAT system, so the system would be equitable & fair to all.
Ø  Procedural Simplification:
Procedural simplifications relating to assessment, appeals, revision and proceeding review have been carried out along with the introduction of VAT.
Ø  Minimizing Discretion:
Under VAT system, it is proposed to minimize discretion with assessing officers that similarity placed persons are treated alike. For example, there would be no discretion in imposing of penalty or the amount of penalty in case of late filing or non-filing of returns, late or non-payment of tax or evasion or avoidance of tax.
Need For Computerization
·    Reduces Manual work.
·    Accessibility all over the country providing online e-registration, e-filing, e-Payments.
·    Creating intelligence by crosschecking data entered by dealers and identifying       potential dealers to be upgraded to different tax structure.
·    Layered security to prevent unauthorized access.

The Modules involved in Value Added Tax are
  • Dealers
  • Circles
  • Divisions
  • Head Office
The above-depicted modules have the following features, which help the tax department in analyzing.
The responsibility of the dealer is to request for the VAT registration form and give all the details after getting the VAT registration form. Then filling the returns every month to the circles office. Finally paying the payments.
Forms involved in Dealer
·         Login for
·         Registration for
·         Payment details
·         Tax Information.
The duty of the circles is to give registration form to the dealers, getting returns from dealers. Inspecting dealers, payments and returns. Then passing the reports to the Divisions.
Forms involved in circle office:
·         Login form
·         Dealer Deletion form
·         Dealer information
They involve in giving authorization to the Circles. Checking for the movements of goods across & within the state.
Forms involved in Divisions:
·         Login form
·         Circle information
·         Dealer information
Managers the Divisions, Circles & finally generates the reports.
Forms involved in Divisions:
·         Login form
·         Divisions information
·         Circles information
·         Dealers information

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