Procedure for VAT Registration

Simply put, VAT is a tax on sale of goods in India. It is applicable to goods and other products.

Value-Added Tax is traditionally levied on tangible goods i.e. items that can be seen, touched or felt with hands.

However, it is noteworthy that in light of recent judgments pronounced by various courts in India, intangible goods are also being brought under the ambit of VAT in India. With recent developments in the field of intellectual property, the test for determining the taxability of a good/product has moved from its tangibility to its capability of being used, consumed, transferred and owned/possessed. Therefore, a permanent transfer of any intellectual property is also liable to be scrutinized under VAT.

The salient feature of VAT is that no input gets taxed twice and the ultimate levy of tax is only on the value addition made in the process of producing and/or selling goods.

Unlike a Direct Tax like Income Tax, it is not the seller who has to bear the burden of tax. It is the ultimate consumer who pays the amount of VAT. The seller collects the VAT from the consumer and pays it to the Government.

Registration: Mandatory or Voluntary?

To understand the VAT registration procedure in detail, first we must understand the term ‘goods.’ We are going to do this with the help of an example.

In the context of VAT, traditionally the term ‘goods’ means any item capable of being seen, touched and felt.

Let’s say you have an electronics showroom in Delhi and you are engaged in selling Televisions. Since a television is a tangible good i.e. it can be seen, touched and felt with hands, VAT is payable by you. Now if your annual sales do not exceed INR 20 lakh, you do not need to pay or register under VAT. But, as soon as your annual sales exceed INR 20 lakh, it will be mandatory for you to obtain registration under VAT and to charge VAT from customers and pay it to the Government.

Owing to the rapidly expanding e-commerce world, it is necessary to clarify that even if you do not own a physical shop or showroom, but you are selling goods exclusively online, you will need to get registered under VAT if your turnover exceeds the specified limit. The reason for this is that VAT is a tax imposed on goods, irrespective of the mode of sale.

It is always advisable to apply for registration under VAT before you cross the threshold limit of annual turnover as you might face heavy penalties if you exceed the prescribed limit.

There are some instances where it is compulsory to get registered under VAT irrespective of the annual turnover i.e. it is mandatory to get registered even if your annual turnover is below the threshold limit. The points below neatly summarizes all such instances.

• You are an importer
• You are registered/liable to get registered under CST
• You are liable to pay tax at a special rate e.g. on liquor
• You are engaged in the business of works contract and opt for the composition scheme
• You are carrying business in a state other than the state of your usual residence
• If you are an Agent (by whatever name called
• If you are availing any tax holiday or tax incentive scheme

Registration: Going Through the Process

The process of registration can be summarized with the help of following points below. The entire process is explained in detail later.

• Locating the VAT Office
• Application for Registration
• Physical Inspection
• Payment of Prescribed Fee
• Issue of TIN/VAT Certificate

Step 1: Locate the local VAT registration department e.g. Department of Trade and Taxes in Delhi

Step 2: Obtain the Registration Form, fill it and submit it along with the required documents. Following documents are required to be submitted along with the application:

• Central Sales Tax registration certificate (Form A)
• Professional Tax registration certificate
• Address and ID proof of the Proprietor/Partner/Director
• Four passport-sized photographs, PAN Card and Bank Account Number of the Proprietor/Partner/Director
• Details of business activities
• A copy of the Rental Agreement of the business premises
• Partnership Deed (in case of Partnership Firms)
• Memorandum of Association and Articles of Association (in case of a Private Limited Company)

Step 3: After submission of the completed application form, your business premises will be inspected by the local VAT authorities. This is done to establish the authenticity of the business. The time of inspection is notified by the authorities.

Step 4: After the physical inspection of your premises is complete, you will be required to pay the prescribed fee for registration.

Step 5: After you make the payment, a Taxpayer’s Identification Number (TIN) will be issued to you immediately. A certificate of registration under VAT will be issued within a week’s time.

Now your business is registered under VAT and you can start collecting VAT from your customers on goods sold to them as well as setting off the input VAT paid by you on purchases.

There are several other benefits of registration like:

• No Cascading effect. All inputs will be taxed only once.
• After obtaining registration, you will be known as a registered dealer. A registered dealer can opt for the VAT composition scheme.
• Registration entitles you to a TIN No. and you will be able to issue tax invoices. You cannot issue tax invoices without a TIN Number.

Note:Some states like Delhi have also started the facility of online registration. In this case, the application form can be filled online and a self-attested scanned copy of all the requisite documents is required to be uploaded. The registration will be granted immediately on payment of fee and physical verification of premises by local VAT authorities will take place after the registration is granted.

The advantage of online registration is that you do not need to visit the Department of VAT to obtain registration.

However, your registration is liable to get canceled if any discrepancy is found in the course of physical verification in relation to the information provided online.

VAT registration process is fairly simple and with the introduction of online registration, the process has become even more convenient and easier.

Author: This blog is written by  Ms. Pragya Chaturvedi, student of Faculty of Law, University of Delhi , a passionate blogger & intern at  Aapka Consultant.

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