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.

What is VAT Registration?

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).

Procedure for VAT Registration

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:

  • The VAT registration application along with the required documents needs to be filled with complete information and then submitted to the functional local VAT office for the VAT registration.
  • The local VAT office shall conduct an inspection of the premises of the company within three days after submitting the application form.
  • Once the inspection has been made by the local VAT office, the relevant professional fee deposit fee needs to be paid.
  • After the payment of the fee deposit, the TIN No. will be allotted and the VAT certificate will be issued within a day.

How to Register for VAT Online?

VAT registration can also be done via the online method. The VAT registration online in India entails the following steps:

  • Log on to your state’s VAT website and then click on the registration tab
  • Add the required information and attach the necessary documents as a request for your company
  • The company may be allotted a temporary VAT number
  • Once the verification of the documents and the VAT registration application is done, the permanent VAT registration number will be allocated to your company.

Documents Required For VAT Registration

The major documents that you will require to submit with your company’s VAT registration are

  • Incorporation Certificate of Company (in case of Companies)
  • MoA (Memorandum of Association)and AoA (Articles of Association) in case of Companies
  • Details of people involved in the firm.
  • Company’s Director address proof– Lease / Rental Agreement
  • PAN Card of the company/ Individual PAN card in case of Proprietorship
  • ID Proof of the Director of the company
  • Rental/Lease Agreement of Company / Proprietorship
  • Partnership Deed in case of a Partnership firm-
  • Passport size Photograph of Director of the firm.

The VAT registration process also requires the following documents from a company:

  • Name of the Dealer
  • Company’s name
  • Postal Address
  • Telephone number
  • Email id
  • Details of Director/ Managing Director/ Partners / Proprietor
  • Authorized Signatory’s details
  • Pan number of the company
  • Date of Commencement of Business
  • Date of Birth/ Incorporation (in case of Company)
  • Nature of Business
  • Commodities description
  • Bank Account details
  • List of Directors (in case of Companies)

VAT Registration Limit or Fees

Here are the details of the VAT registration limit and the fees required for the same:

Invest in elss funds
  • VAT registration fee – Rs.500
  • Professional Tax Rs.1000 for sole Proprietor, Rs.1000 for each partner of the Partnership, Rs.2500 for Private Limited
  • Rs. 2000 for turnover of Rs.0 to Rs.2.00lakhs
  • For a turnover of Rs. 2.00 lakhs to Rs.10.00 lakhs – Rs.3000/-
  • For a turnover of Rs.10.00 lakhs to Rs.25.00 lakhs – Rs.6000/-
  • Turnover above Rs.25.00 lakhs – Rs.10000/-

How to Check VAT Registration Status?

  • Just log on to the VAT registration website
  • Provide your credentials or the VAT number
  • The VAT status and dealer status will hence be provided to you

Benefits of VAT Registration

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.

Bottom Line

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.