Periodic VAT Returns
Once a business unit is registered for VAT functions, the VAT laws set down that VAT payer should file periodic returns. In the periodic returns, business unit submits details of their inward supply and outward supply. The periodicity of the VAT returns is prearranged based on stricture such as turnover, nature of industry etc. The periodicity of the VAT returns can be monthly, quarterly, half yearly or annually. Classically, the periodicity for large business units is monthly whereas for medium / small enterprises it can be quarterly, half yearly or annually. Whilst, for regularity, it is up to a business to have common periodicity for all the business entities in a VAT jurisdiction, still spread out VAT filing could be approved due to various coherent (such as to reduce compliance load on medium / small enterprises as well as VAT portal).
As regards, the details to be filed in VAT returns, VAT law may need the business entity to, either file invoice level details or whole details (i.e. gross amount of sales/ purchase in a particular period). In case the VAT law inquires details at an arse level (than invoice level details) then it undoubtedly, some degree, it make simpler the VAT compliances.
VAT return compliance characteristically involves five stairs such as:
a. Amassing the details (such as outward supplies, inward supplies, amount of input tax credit available, reverse charge etc)
b. Calculating the VAT liability.
c. Placing the VAT liability (if any).
d. Organizing the VAT return.
e. Filing/submitting the VAT return.
The business entities, meet the VAT return compliances either within or with the help of outside VAT consultants. It is usually seen that given the risk of the wrong understanding of VAT law or omitted vital numbers, most large and medium business entities like better external VAT consultants. Additionally, involving external consultant is better as it means that the producer-supervisor principle (or four eye test) is followed which reduces the inaccuracy. Given that the VAT returns are periodical and missing the due date of VAT return can activate penal consequences, it is critical for business entities to set up suitable process and timelines for preparing and filing VAT returns.
Periodic VAT Returns in VAT may become superfluous!
As a replacement for of setting down periodic VAT returns, most of the VAT jurisdictions are either reallocated or planning to introduce uploading of VAT invoices on the real-time basis. This will mean there is no preset due date for uploading VAT details with VAT Authorities and rather, VAT details are required to be uploaded on a real-time basis. This swing to instantaneous though anticipated to bring generalization in long-run, still in short-run, this means considerable every day compliances for business entities. Typically, in coincident system, the business entity is requisite to upload the invoices continuously (anytime during the month).
Further, such uploaded invoices are constantly perceptible to the recipient. The concurrent system ties the buyer and receiver and ensures their compliances. Certain VAT system even requires that the unique invoice number be generated from the common Government VAT portal to allow following of input tax credit invoices. In case the VAT system is suggesting a concurrent system, it is critical for business units to set up a suitable process for preparing and uploading VAT details on a real-time basis.
Get ready for VAT Audit!
After the beginning of VAT and filing of few VAT returns, VAT payers normally move from Stage-I (pre-VAT) to Stage-II (VAT first return), to Stage-III i.e. regular VAT compliance and VAT return filing. It is relevant to note that the propel of Stage-III should be on documentation and maintaining prescribed VAT records. Documentation and maintaining prescribed VAT records is decisive, as VAT clears up in any jurisdiction, VAT payers are necessary to face VAT audits initiated by VAT Authorities. Thus, VAT payers not only should gear for VAT audits bit also, pro-actively, consider preparing customized ‘VAT Manual’ for their own business which should contain all the tax positions adopted, but processes also followed and the basis of preparation for VAT returns. The VAT manual will be useful during the audit and could also be used for VAT training for new employees in the organization.
Facilitating VAT overseer is solution
The acquaintance of VAT law and systems clutches the key during and after VAT transition. Chiefly, VAT Authorities are showered with abundant VAT doubts. Not only legal questions are asked to the VAT Authorities but also technical queries regarding VAT portal. Business units appear up to the VAT Authorities for the declaration of these queries. Also, VAT Authorities could be necessary to instruct the VAT payer on various aspects of VAT and in-turn become propagators for VAT. Given the aforementioned, it is indispensable that the VAT administrators are well equipped about VAT.
Give power to clients is significant!
VAT affects every consumer in the country. Everything a customer uses gets impacted. Thus, if the consumer is not well well-informed it is likely that the supplier may swindle the consumer in the name of VAT. Thus, to make sure that VAT does not escort to puzzlement, price rises and evasion, diffusion of VAT knowledge to empower the end consumer. VAT Administrators may explore various modes of information broadcasting like TV/radio, newsprints and social media for spreading of VAT awareness to end consumer. VAT Administrators may reach out to well-known consumer associations to communicate benefits of VAT and get valuable feedback from the key stakeholder who will actually bear the impact of VAT. As VAT is masterpiece change, ‘Educate, Enable and Empower’ could be the slogan to fruitfully cruise over to VAT.
Instruct VAT payers!
Based on the legal knowledge of VAT available in public domain (such as VAT law, various regulations etc.) the VAT Authorities may think to grip informative colloquium to alert the taxpayer’s community. For these tutorials, the VAT Authorities may consider partnering with prominent trade chambers/ associations. Early commencement of these training will give the taxpayers a sense of participation. Initially, most of the taxpayers have apprehensions around chief features such as place of supply, the value of supply, time of supply, compliance provisions, transition provisions etc. These concerns can be distributed through seminars. The seminars can make sure that the VAT Authorities reaches across nuke and corner of the Country for a steady and reliable source of feedback.