Delhi Value Added Tax - Part 4 - Books and Records
November, 01st 2010
You must keep sufficient records so that your DVAT liability can be readily assessed and to support any tax credits that you claim.
You must keep a copy of all tax invoices issued or received and a copy of all challans (Form DVAT-20) evidencing payment of tax, interest, penalty or other amounts owed.
Your records would generally include:
Books of account;
Credit and debit notes;
Invoices, receipts, vouchers;
List of debtors and creditors;
System and program documentation which describes the accounting system; and
Any other documents that verify transactions or entries in any books of account.
In the new DVAT administration, there is no change in the record and bookkeeping requirements in relation to books of accounts, sale and purchase details, proper custody and maintenance of statutory declaration forms for purposes of CST.
You must hold all records for at least seven years. Penalties may be charged if you do not keep proper records.
Registered dealers whose turnover in a year exceeds Rs 40 lakhs (or such other amount that may be prescribed) will have to get their accounts audited by an accountant within a period of nine months from the end of the year and submit a report of such audit to the department within twenty eight days of the expiry of the nine-month period. Generally, a separate audit for DVAT purposes will not be necessary where such an audit is done as per the requirements of the Income Tax Act 1961, as amended from time to time. However, in certain exceptional circumstances, the department may require a dealer or class of dealers to have a separate audit carried out to meet the unique requirements of DVAT.
For DVAT purposes, you must record your turnover of purchases and sales in the accounts maintained by you. These accounts should:
Be regularly and systematically prepared and maintained;
Give a true and fair view of your dealings; and
Be used by you for determining your turnover of the business for commercial or income tax purposes.
The accounts will normally be prepared on an accrual basis. The Commissioner may allow certain classes of dealers to record transactions on a cash basis. A dealer may change the system of accounting with the consent of the Commissioner on terms and conditions as may be prescribed by him.
Using the accrual basis you must generally account for DVAT in the period in which the consideration for the sale/ purchase is receivable/ payable (and not as money is received or paid). With the accrual basis you account for a sale when you issue an invoice. Timely issuance of invoices is, thus, of paramount importance.
An advantage of using the accrual basis is that you may claim credit for the DVAT incurred on purchases before you make the payment. However, you may also have to pay DVAT before you receive payment from your customers.
If you use the cash basis, you generally account for DVAT in the taxable period in which you make or receive payment. The cash basis is suitable for a small business or a non-profit making organization, which currently uses the cash system. You account for DVAT only when payment is received from the customer, which could be beneficial to you if you give lengthy credit periods to your customers.
Under DVAT, tax invoice is a very important document.
A tax invoice is a legal document, which shows the DVAT payable / paid for a transaction. A seller is required to issue a tax invoice if the purchaser requests one. Irrespective of the accounting basis that you follow, you can only claim a tax credit if you hold a valid tax invoice at the time of furnishing your return for the tax period.
Every registered dealer must keep a copy of all tax invoices issued by him. Every dealer must preserve the original of all tax invoices received by him.
What Should a Tax Invoice Contain
A tax invoice should contain:
The words 'Tax Invoice' in a prominent place;
Name, address and registration number of the selling dealer;
Name and address of the purchaser;
Registration number of the purchaser, if he is registered
Individual pre-printed number and date of issue of invoice; description, quantity, volume and value of goods and the tax charged;
Signature of dealer or his/ her representative; and
Name and address of the printer and first and last serial number of tax invoices printed.
A tax invoice shall be issued in duplicate; the original is for the purchaser and the duplicate is to be retained by you as a selling dealer.
Duplicate and Proforma Tax Invoices
If the buyer loses his tax invoice, you may issue him a copy clearly marked 'duplicate'.
If you use a computer to print invoices, you may do so subject to the following:
Maintain a series number for all invoices, and
Retain the duplicate copy securely.
You may also use the format of tax invoice for issuing Proforma invoices. However, these should be clearly marked 'Proforma invoice, not for tax credit'.
A retail invoice is issued by registered dealers for all sales above Rs 25 value where a tax invoice is not issued.
A retail invoice should contain:
The words "Retail invoice" or "Cash Memorandum" or "Bill" in a prominent place;
The name, address and registration number of the selling dealer;
In case of inter-state sales, the name, address and registration number of the purchasing dealer and type of statutory form against which the sale has bee made;
Individual serialized number and the date of issue of the invoice;
Description, quantity, volume and value of goods and services provided, inclusive of amount of tax charged;
Signature of the dealer or his representative; and
Credit and Debit Notes
A seller must issue a credit note when the price for a sale is reduced or the nature of the sale varied after the tax invoice was issued. For example, this may happen when faulty goods are returned. When the adjustment results in an increase in tax, the seller must issue a debit note to the buyer. Only one credit/ debit note can be issued for the amount of excess/deficiency.
Adjustments to tax which are required to be made due to a variance in the price or the nature of the sale may only be made if a credit note has been issued.