Sunday, January 23, 2011

Andhra Pradesh Value Added Tax History

AP - VAT

In the Indian state of Andhra Pradesh, the Andhra Pradesh Value Added Tax Act, 2005 came into force on 1 April 2005 and contains six schedules. Schedule I contains goods generally exempted from tax. Schedule II deals with zero rated transactions like exports. Schedule III contains goods taxable at 1%, namely jewellery made from bullion and precious stones. Goods taxable at 4% are listed under Schedule IV. The majority of foodgrains and goods of national importance, like iron and steel, are listed under this head. Schedule V deals with Standard Rate Goods, taxable at 14.5%. All goods that are not listed elsewhere in the Act fall under this head. The VI Schedule contains goods taxed at special rates, such as some liquor and petroleum products.

The Act prescribes threshold limits for VAT registration - dealers with a taxable turnover of over Rs.40.00 lacs, in a tax period of 12 months, are mandatorily registered as VAT dealers. Dealers with a taxable turnover, in a tax period of 12 months, between Rs.5.00 to 40.00 lacs are registered as Turnover Tax (TOT) dealers. While the former category of dealers are eligible for input tax credit, the latter category of dealers are not. A VAT dealer pays tax at the rate specified in the Schedules. The sales of a TOT dealer are all taxable at 1%. A VAT dealer has to file a monthly return disclosing purchases and sales. A TOT dealer has to file a quarterly return disclosing only sale turnovers. While a VAT dealer can buy goods for business from anywhere in the country, a TOT dealer is barred from buying outside the State of A.P.

The Act appears to be the most liberal VAT law in India. It has simplified the registration procedures and provides for across the board input tax credit (with a few exceptions) for business transactions A unique feature of registration in Andhra Pradesh is the facility of voluntary VAT registration and input tax credit for start-ups.

The act not only provides for tax refunds for exporters (refund of tax paid on inputs used in the manufacture of goods exported) but also provides for refund of tax in cases where the inputs are taxed at 14.5% and outputs are taxed at 5%.

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