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  • Karnataka VAT

    The concept of Value Added Tax came into being in most Indian states on the 1st of April, 2005. The system’s objective was to facilitate transparency in taxation while reducing trade barriers to a significant extent and minimising the surging effect of taxes. The Karnataka VAT Act was implemented in 2003 and contains all the provisions based on which VAT will be charged within the state. It aims at streamlining and simplifying the process associated with the levy of tax on the sale or purchase of goods in Karnataka.

    Karnataka VAT Rates:

    VAT rates are levied on the sale of taxable products and services. These products and services are governed by certain schedules of the Karnataka VAT Act of 2003. Enumerated in these schedules is a list of products and services and the VAT rates applicable to their sale. Section 4 of the Karnataka VAT Act, for instance, not only specifies, but also grants power to the state government to lower the tax payable. The power to increase VAT rates also rests with the state government. So far as Section 4 goes, here are the tax rates applicable:

    Schedule / Goods

    Rate of Tax

    Products in the Schedule 2

    1%

    Products in Schedule 3

    5.5%

    Products in Schedule 4

    20%

    Products not covered under any schedule

    14.5%

    Manufactured tobacco goods such as gutkha, cigarettes and cigars

    20%

    Declared products (defined under Section 14 of the Central Sales Act)

    5%

    Schedules 1 to 6 of the Act enumerate various products and services that will be subject to exemption. They also enlist the VAT rates that will be remitted and imposed on effecting sale. A Revenue Neutral Rate of 14.5% will be charged for the taxation of unscheduled products and services. Unscheduled products and services are those that are not covered by any of the schedules of the VAT Act. Schedule 5 covers the Input Tax on restricted products and services. Schedule 6 covers the VAT rates for different description of the works contract and if the description of said works contract is not covered under any category then it will be liable to a VAT rate of 14.5%.

    Karnataka VAT Registration:

    Every dealer who engages in trade of products and services that come under the ambit of VAT must register themselves prior to the commencement of trade. The registration process is simple and hassle-free, requiring you to fill in the VAT Registration form (Form VAT – I). You must provide all personal details such as name, date of birth, amount paid, nature of business, etc. So far as the business is concerned, details such as address, directors or partners, if any, PAN details, date of incorporation, turnover, account details and TIN must also be provided. The VAT Registration form will be closely perused by the relevant authorities to check if all relevant eligibility criteria are met before they give you a registration certificate.

    Registration is mandatory for all dealers who have a turnover in excess of the threshold determined by the government of Karnataka. If the taxable turnover of a dealer exceeds Rs.10 lacs during the course of a financial year, or if the taxable turnover exceeds Rs.83,330 in any one month of the financial year, registration is compulsory.

    Karnataka VAT Return e-Filing and Payment:

    Individuals who want to file their VAT returns can do it online by visiting the Karnataka Commercial Taxes Department’s official website. You will first have to register yourself after which you can visit the appropriate link to file returns for any particular period. All you have to do to file your returns online is to download the relevant VAT returns form, fill in the required details, and submit it as per your convenience.

    The website can also be used to make online payments. Once you have registered with the website, you can simply logic with the verified credentials and opt to pay either via debit / credit card or net banking. Once the payment has been made, you will receive a Unique Reference Number that can be used for further communication.

    Frequently Asked Questions:

    1. Which department imposes and collects VAT in Karnataka?

      The department responsible for the imposition and collection of value added taxes in Karnataka is the Commercial Taxes Department.

    2. Will I receive a challan or receipt to confirm that I have paid VAT online?

      Yes, an online receipt containing the unique transaction ID will be displayed on the screen once you have completed making a payment. The amount of money involved in the transaction will also be mentioned in the receipt along with other relevant details, and the receipt must be printed out and preserved for future communication.

    3. How often should I pay VAT?

      The payment of VAT must be done on a quarterly basis.

    TAX
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