Value-added tax is a kind of tax levied on goods and services added at each stage of production or distribution cycle. Firstly, the value-added amount is identified, and then tax is levied accordingly on all the interstate purchases and sales. The introduction of VAT has helped traders, businessmen and the government by making the taxation process more efficient and transparent.
VAT is to be paid by all enterprises an annual turnover of Rs. 5 lakh or more. To do so, you must apply for a VAT registration, which takes around 20 to 40 days for approval. Once the approval is done, you can both make e-payment online for the amount collected and e-file VAT returns on the Commercial Taxes website for your state. VAT returns must be filed once every month or quarter (depending on turnover or the state).
How to Access the Online VAT e- Filing System?
All goods and services producers registered under the VAT Act 2003 are provided with a user Id and password by the Directorate of Commercial Taxes. Users need to use these credentials to log in to the VAT e-filing system. Alternatively, the Directorate help desk can help in retrieving the login details.
Prerequisites for e-Filing VAT Returns
Before you decide to file VAT returns online, there are a few points that need to be kept in mind. Basically , these are the preconditions for the VATe Filing system.
- TIN Number: The tax identification number (TIN) is required before you start the VAT e-filing process. TIN is an 11-digit number furnished by the state tax department. This number helps to track any payments or e-payments made and previously filed returns.
- Login Details: You should have the user ID and password received from the Tax Directorate office. In case this is your first VAT payment, you will have to change your password before you can proceed. Without these, no user can log in and pay his/her VAT return online.
- e-Filing Software: All state tax departments have issued software for e-filing of VAT returns. A download option for this client software can be found once you have logged in the online portal. This software accepts the data for the e-filing of return and processes it into XML. This can be later uploaded to the online portal of the Directorate of Commercial Taxes of the state you’re in.
- VAT Receipts: You will obviously need the details and challan numbers of the VAT receipts, against which you have made payment or e payments in the previous month.
If you have all the above prerequisites handy, you’re ready to start filing your VAT return. This could take 2 to 6 months depending on the number of VAT receipts.
How to File VAT Return Online?
Listed below are all the steps that you should follow for VAT return e-filing:
Step 1: Log in
Log in to the online portal of the Directorate of Commercial Taxes for your state. Since VAT comes under the purview of state governments, each state has different VAT e-filing portals. However, the procedure is the same for all of them.
Step 2: Password Change
If you are entering the website for the first time, you will be needed to change the password which you should certainly do.
Step 3: Form 14D
Next, you will have to download the PDF version of zipped Form 14D file; on unzipping it, you will find a PDF version of the form. This is the VAT return filing form which you need to fill completely, along with the annexures.
Step 4: Complete the Form
Once the download is complete, the form and all the downloaded annexures need to be filled duly with data contained in your VAT receipts and other relevant details. This can take you a couple of hours or a whole day depending on the number of transactions.
Step 5:Generating XML
Using the downloaded software from the Directorate of Commercial Taxes online portal, you can create XML files out of the filled forms within minutes. Only Form 14D should be uploaded to be in XML, not the annexures, as only it needs to be digitally processed
Upload the generated XML file as well as the duly filled annexures.
Step 7:Correct Mistakes If Any
The filing system instantly spots mistakes you’ve made at this point, so make sure that all data uploaded is correct otherwise the server will prompt and ask you to rectify.
Step 8: Acknowledgement
Once all the forms have been submitted successfully, an acknowledgement receipt will be generated. This is proof of your VAT returns filing for the month. You can either download or print this receipt.
Who Needs to File VAT Returns?
VAT Returns must be filed by all producers of goods and services to the Government of India. Any dealer regardless of manufacturing or trading business, a partnership firm, sole proprietorship or a private limited company whose turnover annually is over Rs.5 lakhs will have to get registered with the VAT Department. However, this amount is a subject to State laws and can be modified by the State Government.
However, dealers who are not under compulsion can also obtain registration and benefits of issuing tax invoice.
VAT is collected at each phase of production, therefore, some of the amounts that have been collected by the customers will be retained by the producers and the rest will have to be paid to the government through designated banks every month.
Benefits of Filing VAT Returns Online
E-filing of VAT returns is a great way of keeping yourself updated with the taxation process. Not to mention, it has several improvements over manual filing as well. Some of the key benefits are listed down:
Saves Time: Manual e filing can take a couple of days in case your business has made a lot of transactions, particularly if the VAT rate differs. On the other hand, online filing can be completed in a matter of hours and is less tedious.
Real-time Feedback: As soon as you upload the form in XML format to the e-filing portal, you will instantly know whether there are any discrepancies. As in case of any errors, you will be informed how they can be rectified. The state portals also have a detailed set of FAQs, in case you’re stuck.
Acknowledgements Saved: There are chances of paper receipts of getting misplaced or damaged. However, in the case of any inspection, you can’t just say you’ve lost them. Producers who file their returns online exclusively are even asked to produce papers on some occasions (paper receipts are rarely asked but can also be asked to produce paper receipts at times), as the information is easily accessible by the state tax department.
Always Be Aware: Your account on the e-filing portal is where the government will send you all the important notifications. This can be in anything including any information pending from your side. So in case you are confused about what you still need to do to complete the procedure, all you need to do is log in. If the portal does not ask for any documents or clarifications, you’re done.