CHAPTER – III
DETERMINATION OF TAXABLE TURNOVER AND
CALCULATION OF TAX PAYABLE
16. Determination of Taxable Turnover.
1) Time of Sale:
(a) a VAT dealer selling taxable goods shall account for the VAT at the earliest of the date of delivery of the goods or the issue of tax invoice;
(b) input tax credit shall only be claimed on receipt of the tax invoice.
(2) The following amounts shall not be included for the purpose of determining the taxable turnover, namely,-
(a) all amounts allowed as discount provided such discount is allowed in accordance with the regular practice of the VAT dealer, or is in accordance with the terms of a contract or agreement entered into in a particular case and provided also that accounts show that the purchaser has paid only the sum originally charged less the discount;
(b) all amounts charged separately as interest or as finance charges in the case of a hire-purchase transaction or any system of payment by installments.
(3) An adjustment of sale price and VAT or any other tax can be made in relation to a taxable sale where,-
(a) the sale is cancelled;
(b) the nature of the sale has been fundamentally varied or altered; or
(c) the previously agreed consideration for the sale has been altered by agreement with the recipient, whether due to an offer of a discount or for any other reason; or
(d) the goods or part thereof have been returned to the seller within a period of twelve months from the date of sale and the dealer making the sale has accepted the return of the goods:
In the case of the events listed in clause (a) to (d) where a tax invoice or an invoice has not yet been issued, the sale price shall be adjusted in the tax invoice or in the invoice. Where a tax invoice or invoice has been issued, a credit or debit note shall be used to adjust the tax invoice or invoice in accordance with Rule 28.
(e) where any goods sold before 31.03.2005 are returned on or after 01.04.2005 and sales tax relief on closing stocks was already claimed by the buying VAT dealer, an amount equal to the purchase value of the goods and the sales tax credit claimed shall be deducted from the value of the input and the value of input tax in the tax period in which goods are returned by him provided credit note issued by the seller is on hand. The selling VAT dealer in such case may reduce his output value and output tax equal to the original sale value and the sales tax in the return for the tax period during which the goods have been returned.
(f) where ever any credit notes are to be issued for discounts or sales incentives by any VAT dealer to another VAT dealer after issuing tax invoice, the selling VAT dealer shall pass a credit note without disturbing the tax component on the price in the original tax invoice, so as to retain the quantum of input tax credit already claimed by the buying VAT dealer as well as not to disturb the tax already paid by the selling VAT dealer.
For example: if 100 TVs are sold @Rs.10,000/- each, amounting to Rs.10,00,000/-, the original tax charged @ 12.5% is Rs.1,25,000/-. If the discount of 10% is offered subsequently based on fresh purchases, the selling dealer can pass on the benefit of Rs.1,00,000/- for the price with out disturbing the tax component of Rs.1,25,000/-. The buying dealer will not alter the input tax credit already claimed amounting to Rs.1.25,000/-. The selling VAT dealer will not claim reduction in output tax liability consequent to lowered price offered.
(* inserted by G.O MS No 2201 Rev(CT-II) Dept. Dt 29th December 2005 w.e.f 1-12-2005)
4) Where the output tax properly due in respect of the sale exceeds the output tax actually accounted for by the VAT dealer making the sale, the amount of the excess shall be regarded as tax charged by the VAT dealer in relation to a taxable sale made in the tax period in which the adjustment took place.
5) Where the output tax actually accounted for exceeds the output tax properly due in relation to that sale, the VAT dealer making the sale shall be eligible for an adjustment of excess amount of VAT in the tax period in which the adjustment took place:
Provided that no such adjustment shall be allowed where the sale has been made to a person who is not a VAT dealer unless the amount of the excess tax has been repaid by the VAT dealer to the recipient, whether in cash or as a credit against any amount owing by the recipient.
6) The provisions of sub-rule (1) to (5) shall mutatis-mutandis apply to TOT dealer.
7) In case of a VAT dealer specified in sub-section (9) of Section 4, forty percent (40%) of the total amount of consideration charged by such dealer shall be allowed as deduction and the balance of sixty percent (60%) of the total amount of consideration shall be the taxable turnover for the purpose of levy of tax by way of composition.