VAT, short for Value Added Tax, is a type of tax levied by the Central Government on the sale of goods and services when sold to the final consumers. Value Added Tax is charged and paid by the producers of the goods and services but it is finally levied on consumers who purchase the goods and services. As the name suggests, it is charged on the value added to a product and the final customer has to pay it as per the rules and regulations. All business organizations and manufacturing entities need to be registered as per the VAT registration act of the country in order to VAT annually.
VAT registration or TIN number is a mandatory and important process for all the traders or businesses who are actively involved with manufacturing or even in the sale of goods and products. VAT is quite similar to Sales Tax but it’s quite different from sales tax considering that it is collected once at the time of purchasing. VAT registration can be done online and is really hassle-free as compared to traditional methods; one of the reasons why it has become popular among entrepreneurs. Manufactures and traders must obtain VAT Registration if their annual sales are more than Rs. 5 lakhs (Rs. 10 lakhs in some states).
The VAT Registration procedure is quite simple, but there could be minor differences for different states. In India, Tax credit method is used for Vat assessment and collection. The basic rate of value-added tax ranges between 4% and 12.5% for different categories of products and services.
The basic steps that are required for the VAT registration procedure are as follows:
VAT registration can also be done via the online method. The VAT registration online in India entails the following steps:
The major documents that you will require to submit with your company’s VAT registration are
The VAT registration process also requires the following documents from a company:
Here are the details of the VAT registration limit and the fees required for the same:
The registration for VAT provides a lot of benefits to your company. Some of them are:
Legally secured– Applicants will get a VAT registration number and if a company has VAT registration number then there will be authenticity associated with the company. This adds credibility to the business and other business entrepreneurs would be more comfortable in carrying on their business. In a nutshell, the company will be legally secured and will have a trustworthy and professional image.
You can use Set off– The Company can easily use the set-off which is basically the difference of the VAT given to the supplier and the VAT that the company received from the customers. So, VAT for a product has to be paid to the Government only once and thus if the company has already paid VAT then it can deduct it from what the customers gave to the company.
Established image of the company– As per the law, when the business turnover is more than Rs.5.00 lakhs, VAT registration becomes mandatory and it gives a clear image about the company and helps define its image as an established company. This, in turn, helps the company to expand by appealing to more entrepreneurs
VAT refund– Once the VAT registration is done, it makes the company eligible for VAT refunds for the taxes paid in European countries if any goods and services were purchased there.
VAT status– When your company has VAT registration, you can easily check the VAT status online by using just the VAT number of the company. The benefit which the company gets is the seamless experience while going through all the documents and receipts of the company to check when the VAT was paid previously.
VAT registration can provide a plethora of benefits if you are starting off as a small business. However, one important thing to remember is that you will have to maintain accurate records and submit regular VAT returns. There are many software solutions available to assist with VAT or you can take help of your accountant as well.