Professional Documents
Culture Documents
KVAT AUDIT
Time limit of filing- 31st December 2010 for Financial Year 2009-2010
1
8/26/2010
Note to Part II
AUDIT CERTIFICATE
The introductory Para of the certificate defines the status of the Auditor,
2
8/26/2010
CERTIFICATE- CLAUSE
1) The books of account and other related records and registers maintained by the
dealer are sufficient for the verification of the correctness and completeness of
the returns filed for the year.
Maintenance of Books of Accounts as per KVAT law
CERTIFICATE- CLAUSE
2) The total turnover of sales declared in the returns includes all the sales
affected during the year.
Total turnover as defined in Rule 3(2)
All sales are Accounted
Classification of sales – Rate wise/local-Interstate-/etc
Variances of returns with books of Accounts
3
8/26/2010
CERTIFICATE- CLAUSE
3) The total turnover of purchases declared in the returns includes all the purchases
made during the year.
- Accounting of all purchase invoices
All kinds of purchases like local purchases(RD/URD), interstate purchases, import,
etc
CERTIFICATE- CLAUSE
4
8/26/2010
CERTIFICATE CLAUSE
5)The deductions from the total turnover including deduction on account of sales returns
claimed in the returns are in conformity with the provisions of the law.
- Conformity of deductions as per Rule 3(2) of KVAT Rules
- Sales return- Time span with support of Credit notes, Debit notes,
CERTIFICATE CLAUSE
6) The classification of goods sold, rate of tax applicable and computation of output
tax and net tax payable as shown in the return is correct;
- KVAT Schedules, Central Excise Tariff, Commissioner Clarifications, Notifications,
Circulars
- Computation of output tax and net tax payable as per KVAT law
5
8/26/2010
CERTIFICATE CLAUSE
7) The classification of goods purchased, the amount of input tax paid and deduction of
input tax credit claimed in the return is correct and in conformity with the
provisions of the law;
- KVAT Schedules, Central Excise Tariff, Commissioner Clarifications, Notifications,
Circulars
- Whether goods are purchased are eligible or ineligible for claim of input tax paid.
CERTIFICATE CLAUSE
8) The utilization of statutory forms under the KVAT Act, 2003 and the CST Act,
1956 is for valid purposes;
- Obtained statutory forms from department
- Valid purpose……?
6
8/26/2010
CERTIFICATE CLAUSE
- information other than the above clauses like excess tax collected, carry forward of
credit, etc
CERTIFICATE
Summarize the additional tax liability or additional refund due to the dealer in
his report.
The Summary sheet should disclose the difference between the monthly
returns and the audited figure pertaining to output tax payable, Eligible input
tax credit, Ineligible input tax credit, CST payable and other items.
7
8/26/2010
CERTIFICATE
Refund
PART 1 CLAUSE 12
Whether registered under the KTEG Act, 1979 and enrolled / registered under the
KTPTC & E Act, 1976
Refer VAT 1
Check whether Professional Tax has been discharged or not for all the
branches.
Books of account maintained
Cash Book, General Ledger, Bank book, Sales Register, Purchase Register, , etc
which are generated from the computer system
Method of valuation of opening and closing stocks
How does one go about valuing the opening stocks
8
8/26/2010
PART 2 - CLAUSE 1
Total and Taxable turnover
Refer Rule 3 for the purpose of both total and taxable turnover;
Stock transfer should be disclosed at prevailing market value or the amount for
which the goods are ordinarily sold by the dealer;
Stock transfer of capital goods ?
CLAUSE 3
Details of taxable sales within the State
One needs to provide – description of goods, taxable turnover, rate of tax and
tax payable
Tax payable and tax collected is different
Sale of fixed assets which is not subject to tax – can the sale value is
considered as inclusive of taxes or one needs to charge on the whole sale value
VAT on Freight charges
9
8/26/2010
CLAUSE 4
Details of purchase and receipts
Imports
Inter-state purchase
CLAUSE 5
Details of input tax paid on purchases
One needs to provide – description of goods, taxable turnover, rate of tax and
tax payable
All purchase which is covered within the definition of input needs to be
disclosed;
Input tax credit based on date of invoice or Accounting of Invoice in the books of
Accounts.
Can input tax credit be adjusted against the scrap sales where the goods are
exempted from tax?
Input credit based on original/Duplicate copies and not Xerox copies
Input tax credit on purchase invoices where the invoices does not bifurcate the tax
component.
10
8/26/2010
CLAUSE 6
Details of input tax paid on purchases eligible for deduction (give details of capital
goods separately and specify whether calculated on the basis of partial rebating
formula)
Here also one needs to provide – eligibility of input tax based on description of
goods as capital goods or inputs.
Computation of eligibility separately based on partial rebate /special rebate
formula if applicable
CLAUSE 7
Details of input tax paid on purchases ineligible for deduction (give details of capital
goods and special rebate separately and specify whether calculated on the basis of
partial rebating formula)
As per section 3(2), Whether Unregistered purchase tax is to be paid on
consumables, printing and stationery (Input tax restricted goods)?
Goods sent for job work
Restriction of input tax credit against the use of exempted goods? And also
Apportionment of input tax credit for sale to SEZ, EOU, E-1 sales, Form I Sales
11
8/26/2010
CLAUSE 8
Details of input tax deduction claimed on purchases relating to inter-State sales and
export sales (give details of capital goods and special rebate separately and specify
whether calculated on the basis of partial rebating formula)
Practically difficult to co relate the input tax claimed with interstate sale or export
for large scale/medium scale dealers
CLAUSE 9
Details of un-adjusted excess input tax credit carried over from the previous year
and to the next year
Opening unadjusted credit if disclosed in VAT Audit Report and also accounted in
books of accounts
Otherwise the opening balance of the excess credit as disclosed in books and
Returns
12
8/26/2010
CLAUSE 13
If the dealer has opted for composition indicate the type of composition scheme
opted and details of the composition amount paid its rate and the basis
Change in the scheme from regular to composition or vice versa
13
8/26/2010
CLAUSE 14 & 15
Details of returns filed along with revised return- change for 2009-2010 or 2010-
2011
Details of inspection of the business premises / books of account of the dealer by
departmental authorities on inspection / visit
Statement/ Notices from the departments- observations by the Auditor
Visits by the VAT officials in the current year asking the details for financial year
2009-2010
KVAT AUDIT
Note to Part II:
Trading account should be maintained in respect of each class of goods by the
traders
Manufacturing account in respect of each class of goods (whether taxable or not)
The Accounting ratios on sales and non sales transactions has to be furnished
separately like turnover ratio, stock turnover ratios, gross profit ratio. Cost of
goods sold ratio
The details of the transactions within the state and outside the state should be
suitably computed and declared separately. It has to be declared separately in the
profit and loss Account and the Balance sheet.
14
8/26/2010
CLAUSE 4 & 5
Stock of declarations / certificates / delivery notes under the KVAT Act, 2003 / CST
Act.
Opening Stock
Loss, if any
15
8/26/2010
• Different Audit report for change in the scheme on the mid of the year
16
8/26/2010
OTHER ISSUES
Audit plan/Audit Programme for KVAT Audit
1) Separate Audit plan/Programme for each class of dealer
2) Objective of Audit is Compliances of the KVAT law
17
8/26/2010
OTHER ISSUES
Areas to be looked into during Tax Audit with VAT Audit like
1) Freight charges for local sales/Interstate sales – Sharavathy Steel Products
Private Limited Bangalore Vs state of Karnataka 2010(68) KLJ 206 (Tri)
2) Total Turnover/Taxable Turnover
3) Sale of fixed Asset/ Restricted capital goods
4) Cost/ ineligible tax credit
5) Non sale transactions (Goods on approval, Stock transfer, sample, gifts)
6) Payment of penalty/interest
7) Disallowed labour and like charges
OTHER ISSUES
8) Closing work in progress
9) Composition/Regular scheme
10) TDS for works contractor- IT/ VAT
11) Adjustment as prior period items/post period items
12) No provision of revision of IT Audit Report and VAT Audit Report
13) Detailed classification of goods for sales and purchases which may be local,
interstate with rate of tax in Trading account for KVAT Audit
18
8/26/2010
OTHER ISSUES
Reliance on Books of Accounts maintained electronically. Hard copies should be
obtained (consolidated) from the management after their conformations.
When Input tax credit is adjusted against the entry tax payable, verification of entry
tax compliance
Whether both the benefits of depreciation and input tax credit can be availed by the
dealer?
Verification of transactions with the sister concern companies
Centralized accounting
Statement/ Notices from the departments- observations by the Auditor
19
8/26/2010
• It requires Central Government, any state government or any other specified bodies
to deduct tax from the amounts payable by them to any works contractor.
• With regard to this now the commissioner can authorize any LVO or VAT sub-officer
• There was no rule prescribing the procedure for the above. Now the same is
prescribed in Rule
• Any legal heir of a deceased individual dealer may apply for transfer of
registration in Form VAT 1 along with the documents prescribed like death
certificate, sworn affidavit etc. And after enquiry, the authority may permit
such transfer.
20
8/26/2010
21
8/26/2010
• The buying dealer, not liable to get registered under the Act can claim the refund of
excess tax paid to selling dealer (MRP).
• The refund claim has to be made in Form VAT 166 to the local VAT jurisdiction of selling
dealer.
• The refund payment order shall be made in Form VAT 255 within sixty days from the
date of application.
22
8/26/2010
Rules 164 & 165 – Clarification of rate of tax and Advance ruling
1. Definitions for the purpose of advance rulings with respect to clarification of rate
of tax are given in rule 164.
2. Advance Ruling Application under section 60 to be made in Form VAT 540 along
with a fee of Rs.1,000/-.
3. The authority, after examining the application, may either admit or reject it. But it
shall not reject without giving an opportunity to the applicant to show cause
against such rejection. If any rejection is made, then the authority shall mention
the reason thereof.
4. The authority shall not admit the application when the issue raised is already
pending before any authority, Tribunal or any court, or relates to a transaction
or issue which is designed apparently for avoidance of tax.
5. The authority shall pass an order within three months of receipt of any
application.
6. Other conditions prescribed for such clarification to be provided.
THANK YOU
sanjay@dnsconsulting.net
23