AUDIT UNDER TAMIL NADU VALUE ADDED TAX ACT, 2006

[Mr. M. GOVINDARAJAN]

Introduction

VAT is a multi point levy where the tax paid on local purchases from the registered dealer can be set off against the tax payable on the sale of goods, other than special goods.   The registered dealers are required to maintain books of account.   Audit is based on the books of accounts. Audit in VAT Act is of two types – one is the audit to be done by Chartered Accountant or Cost Accountant by the dealer himself whose turnover exceeds Re.1 crore in the financial year and the other is the audit performed by the Commercial Tax Department.

Section 63(1) of the Act provides that every dealer, liable to pay tax under this Act, shall make available to the assessing authority any account, register, record or other document relating to the day-to-day transaction of his business.   Rule 6 provides the type of accounts to be maintained by the dealers.

Maintenance of Accounts

Rule 6 of Tamil Nadu Value Added Tax Rules, 2006 provided for maintenance of accounts for the purposes of Tamil Nadu Value Added Tax Act, 2006. Rule 6(1) provides that every registered dealer under the Act shall maintain true, correct and complete account in ink or electronic records in any of the languages specified in the Eighth Schedule to the Constitution of India or in English showing the goods produced or manufactured, bought, sold, delivered or supplied.

Purchase and Sales Account

Rule 6(2) provides that every dealer shall maintain accounts showing purchases and sales. The purchase account maintained by registered dealer, as per Rule 6(2)(b) shall contain the following particulars, namely –

• Invoice No. and date with seller’s Taxpayer Identification Number;
• Description of the goods purchased;
• Value of purchase of exempted goods;
• Value of the goods purchased from registered dealers with rate of tax;
• Value of the goods purchased from unregistered dealers with rate of tax;
• Value of goods purchased from outside the State by issue of ‘C’ Forms as prescribed under the Central Sales Tax (Registration and Turnover) Rules, 1957;
• Value of goods purchased from outside the State without issue of ‘C’ Forms;
• Value of goods purchased as specified in the Second Schedule;
• Value of goods received on stock transfer from principal or head office situated outside the State for sale;
• Value of goods received on stock transfer from the principal within the State for sale;
• Value of goods imported;
• Value of goods returned;
• Total tax paid on local purchases.

Sales or Stock transfer Account

Rule 6(2)(C) provides that The sales or stock transfer account maintained by a registered dealer shall contain the following particulars, namely: -

• Invoice No. and date with buyer’s Taxpayer Identification Number;
• Description of goods with quantity and value sold;
• Sale value of exempted goods;
• Sale value realized out of stock received from the principal;
• Value of goods under zero rated sale out of taxable purchases;
• Inter-State sales out of taxable purchases;
• Sale value of goods specified in the Second Schedule;
• Sale value of goods taxable at 1% with tax due;
• Sale value of goods taxable at 4% with tax due;
• Sale value of goods taxable at 12.5% with tax due;
• Sale value of goods sold in the course of inter-state sale against ‘C’ Form as prescribed under the Central Sales Tax (Registration and Turnover) Rules, 1957;
• Sale value of goods sold in the course of inter-state sales without ‘C’ Form;
• Value of goods dispatched to outside the State with Form F, as prescribed under Central Sales Tax (Registration and Turnover) Rules, 1957;
• Value of goods dispatched to outside the State without Form F;
• Value of goods returned;
• Total tax due;
• Tax payable.

The purchase accounts and sales accounts maintained by a dealer who opted to pay tax under Section 3(4) or section 8 would suffice to contain the description, invoice number and the value of the goods purchased or sold.

Production-cum-stock account

Rule 6(3) provides that every registered dealer who manufactures or produces shall maintain a production–cum-stock account in Form H.

Every registered dealer who is a manufacturer or producer and purchases industrial inputs to use them in manufacture of taxable goods shall issue a certificate to the seller containing the details of his Taxpayer Identification Number, the details of goods purchased, details of goods manufactured and the name and address and Taxpayer Identification Number of the seller.

Sales through agents

Rule 6(5) provides that every registered dealer, who effects sales through agents shall maintain the accounts of goods consigned on each occasion, agent-wise showing the particulars of-

• Name and full address of the agent;
• Nature and quantity of goods dispatched; and
• Details of the mode of dispatch and delivery note.

He shall also maintain the originals of the written contract, if any, entered into between him and the agent, office copies of the authorization letter, consignment notes or dispatch advices, as the case may be, sent to the agent in respect of the goods dispatched on each occasion.

Accounts of agent, broker etc.,

Rule 6(6)(a) provides that every commission agent, broker, del credere agent, auctioneer or other mercantile agent, by whatever name called, shall maintain-

• A register showing the particulars of goods purchased or received for sale on each occasion, in respect of each principal separately;
• The original or copy of the written contracts, if any, entered into between the agent and the principal;
• Copies of authorizations received by him to purchase or sell goods on behalf of each principal separately;
• Details of purchases or sales effected on behalf of each principal showing the names of commodities, quantities and value of purchase or sales, and the tax due thereon;
• Copies of pattials., i.e. accounts rendered by the agent to the principal from time to time, showing the gross amount of the purchases or sales, deductions on account of commission and incidental charges and the net amount payable to the principal.

Jewellery order book

Rule 6(7) provides that every registered dealer, who is a manufacturer of jewellery, shall also maintain an order book showing the particulars of-

• Name and address of customer placing order;
• Date of roder;
• Weight of bullion or old jewels received from the customer; and
• Date of delivery of finished jewels.

Accounts of contract

Rule 6(8) provides that every registered dealer, who opted to pay tax at the rate specified in section 6 of the Act, shall maintain accounts showing the details of contract with value and the payments received.

Input Tax Adjustment Account

Rule 6(9) provides that every registered dealer, who claims input tax credit shall maintain an input tax adjustment account with the following particulars, namely,-

• Month;
• Input tax credit brought forward;
• Input tax paid during the month-

(i)              At 1%;

(ii)           At 4%;

(iii)        At 12.5%;

• Reversal of input tax credit;
• Total input tax credit;
• Ineligible input tax credit;
• Net input tax credit claimed;
• Output tax;
• Advance tax adjusted including entry tax;
• Tax payable.

Rule 6(10) provides that every registered dealer who claims input tax credit on capital goods shall maintain input tax adjustment account with the following particulars, namely,-

• Month;
• Date of commencement of commercial production;
• Value of capital goods;
• Rate of tax;
• Tax paid;
• Tax credit availed-
  • First year (not exceeding 50%);
  • Second year;
  • Third year.

Preservation period

Rule 6(11) provides that accounts maintained by a registered dealer shall be preserved by him for a period of 5 years from the date of assessment.

Audit Report by Auditor

Section 63A (inserted by Act. No18 of 2012 effective from 30.08.2012 vide Notification No. SRO-A23 (a-I)/2012, dated 30.08.2012) of the Act provides for the accounts to be audited in certain cases.

Section 63A (1) provides that every registered dealer whose total turnover including zero rate sale and sale in the course of inter state trade or commerce as specified in Section 3 of the Central Sales Tax Act, 1956 in a year, exceeds Rs.1 crore, shall get his accounts in respect of that year, audited by an Accountant and submit a report of such audit in the prescribed form, duly signed and verified by the Accountant, to the Assessing Authority, within such period as may be prescribed.

The ‘Accountant’ means a Chartered Accountant as defined in the Chartered Accountants Act, 1949 or a Cost Accountant as defined in the Cost and Works Accountants Act, 1959.

Rule 16A(1) (inserted vide Notification No. SRO A-23(a-2) /2012, dated 30.08.2012 effective from 30.08.2012) provides that every registered dealer liable to get his accounts audited as per Section 63A(1) shall furnish the audit report in Form – WW within seven months from the end of the year, in duplicate.

Vide Notification No. SRO A-34 (a-1)/2013, dated 31.10.2013 with effective from 30.10.2013 amended the Rule 16A (1).   According to this amendment every registered dealer liable to get his accounts audited as per Section 63A (1) shall furnish the Audit Report in Form – WW within nine months from the year, in duplicate.

Form – WW

Form – WW is the audit report given by the auditor. This form contains a certificate to be given by the auditor.   In this report the summary of the additional tax liability or additional refund due to the dealer on audit for the particular year is to be furnished.

The report consists of Annexure (Statement of particulars required to be furnished under Section 63A of the Act) which has two parts viz., Part A and Part B.   Part A requires the general information of the dealer.   Part B contains the following:

• Computation of turnover assessable under this Act;
• Computation of purchases;
• Details of input tax credit reversal/adjustment;
• Turnover under the Central Sales Tax Act;
• Details of input tax credit availed on purchase of capital goods (other than parts and accessories);
• Total input tax credit on capital goods;
• Details of delayed filing returns/payment of taxes;
• In case of trading concern the quantitative details of principal items of goods traded are to be furnished;
• In case of a manufacturing concern, the quantitative details of the principal items of raw materials, finished products and by-products.

Penalty

Section 63A (2) provides that if such registered dealer fails to get his accounts audited and submit a report of such audit within the prescribed period, the Assessing Authority may, after giving a reasonable opportunity of being heard, direct such registered dealer to pay by way of penalty of sum of Rs.10,000, in addition to any tax payable, in respect of the said period.

This penalty shall not apply to the departments of Central and State Governments, local authorities, the railway administration as defined under the Railways Act, 1989, the Tamil Nadu State Road Transport Corporation and other similar registered dealers as may be notified by the Government.

Rule 16A (2) provides that the notice for levy of penalty will be issued in Form – RR.

Maintenance of up-to-date accounts

Rule 64(1) provides that every person registered under this Act, every dealer liable to get himself registered under this Act, and every other dealer who is required so to do by the prescribed authority by notice served in the prescribed manner shall keep and maintain an up-to-date, true and correct account showing full and complete particulars of his business and such other records as may be prescribed in any of the languages specified in Eight Schedule to the Constitution or in English, showing the particulars as may be prescribed and different particulars as may be prescribed for different classes of dealers.

Place of maintenance of accounts

Rule 64(2) provides that every dealer shall keep at the place of business specified in the certificate of registration, books of account for the current year.   If more than one place of business in the State is specified in the certificate of registration, the books of account relating to each place of business for the current year shall be kept in the place of business concerned.

Every registered shall also ordinarily keep the books of account for the previous five years at such place or places as he may notify to the registering authority.   If the registered dealer may notify to the change the place or places so notified, he shall, before effecting such change, notify the same to the registering authority.

Audit by Department

Section 64(4) provides that the Commissioner of may order for audit of the business of any registered dealer by an officer not below the rank of Deputy Commercial Tax Officer.   For the purpose of this audit, the selection of dealers for audit shall be made from amongst the dealers,-

• Who have not filed returns within the prescribed period; or
• Who have claimed exorbitant amount of refund of tax; or
• Who have filed returns, but in the opinion of the Commissioner he is not satisfied with the correctness of any return filed, any claim made, deduction claimed or turnover disclosed in any such return; or
• On the basis of any other criteria or in a random selection basis by the Commissioner; or
• Where detailed scrutiny of the case is necessary in the opinion of the Commissioner.

Section 64(5) provides that during the course of audit, the officer may required the dealer-

• To afford him the necessary facility to inspect such books of accounts or other documents as he may require and which may be available at such place;
• To afford him the necessary facility to check or verify the stock which may be found therein; and
• To furnish such information as he may require as to any matter which may be useful for or relevant to any proceedings under this Act.

The Officer conducting the audit shall on no account remove or cause to be removed any books of accounts, other documents or stock.