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2015-04-01 00:00:00Money & FinanceEnglishSales tax for VAT and CST have been updated and included in QuickBooks for India. These changes will help small businesses account for... to Sales Tax (VAT/CST)

Update to Sales Tax (VAT/CST)

4 min read

We’re excited to inform you that QuickBooks India edition will have enhanced Sales Tax (VAT/CST) workflow from new financial year FY2015-16 (i.e. April 1st, 2015). Key Enhancements include:

• Separation of Tax & Retail Invoice

• Central Sales Tax (CST) support such as invoice against C-Form, CST Reg No. tracking, CST Tax & Compliance

• Enhanced Sales Tax (VAT/CST) workflow which makes it easier to use QuickBooks for tax and compliance of VAT/CST

• Tracking and reporting of Unregistered Dealer Purchase

• Statutory VAT/CST reports to help with sales tax filing o Sales Summary / Detail (bill wise)

  • Purchase Summary / Detail
  • URD Purchase
  • CST Missing Declaration
  • Tax Preparation Report / Excel Output

1. Chart of Accounts

Let’s start with the basics…. For VAT/CST, Output and Input tax account (Output tax accounts will include tax collected during sales and Input tax accounts will include tax paid during purchase) for each rate is added. E.g. for VAT 4%, Output VAT 4%, Input VAT 4% is added. For CST, only Output CST for each rate will be added. VAT & CST Payable account is also included which will be updated during the Tax adjustment for a period. 1 2 Payable accounts will be typically cleared after the Tax payment for a particular period. In addition, users can use the Deferred VAT Input Credit account to defer the un-utilized credit from a period. This will show up as Excess Input credit forward in the VAT Computation report.

2. Sales As mentioned in Chart of Accounts section, all sales tax (VAT/CST) collected during sales will be added to Output VAT or CST in the corresponding tax rate.

What are the key invoice structures your Business should consider? Tax vs. Retail Invoice QuickBooks now supports separation of Tax and Retail invoice for businesses that need it. First, turn on the feature in Company Settings > Sales > Classification of Tax and Retail Invoices. 3 Once the feature is on, every time an invoice is created, QuickBooks will classify the invoice as Tax invoice or Retail invoice based on the customer registration (i.e. Tax Reg. No.). If the Tax Reg. No. for the customer is present, it will be considered Tax Invoice, otherwise it will be Retail invoice. The user can override this auto classification, if needed. 45 67 Users (typically auditors) can also run report (“invoice list”) to see a list of tax and retail invoices.

CST Invoices: If your business includes sales out of state, you can add your customer CST Registration No. under Tax info. Once you setup your customer, when you create an invoice, CST related fields such as CST Form Type, Form No. will appear in the invoice. If you have setup tax (See Tax Center), CST Tax rates will appear in the Tax drop down under the items. 8 CST Form No. can be entered later by running ‘CST Sales with Form No.’ report under the CST Tax agency.

3. Purchase As mentioned in Chart of Accounts section, all sales tax (VAT/CST) paid during purchases will be added to Input VAT or CST in the corresponding tax rate.

Tracking of Unregistered Dealer (URD) purchase All purchases (bills) entered for suppliers who are not registered will be considered as an Unregistered Dealer (URD) purchase. Registration is determined by the entry of the Supplier Tax Registration Number and Effective date. 9 All bills created for suppliers with Tax Registration Number on or after the effective date is considered a registered purchase and everything else is considered unregistered purchase. All URD Purchases are listed in the form of report under the VAT Tax agency.

4. Tax Center For QuickBooks companies which has already turned on tax (i.e. Setup tax), CST tax agency will be added with a default tax rate of 2% besides existing VAT and Service Tax. Users can add additional tax codes and rates as required for their business. For QuickBooks companies that are new or not yet setup tax, CST tax agency will be included along with VAT and Service Tax when tax is setup.

Sales Tax Workflow 10 For both VAT & CST, the Tax workflow has been enhanced to include:

  1. Tax Computation This will show the Output (Sales), Input (Purchase) tax for the current payment period along with computed Tax Payable for both VAT, CST 11
  2. Tax Adjustment This will show the common adjustment for VAT/CST in the form of a journal entry. Consider this entry as a starting point populated for your convenience and make the necessary adjustment as needed to suit your business.
    12 As mentioned on QuickBooks, please consult your Chartered Accountant / Tax Professional before saving the changes. The purpose of the Tax adjustment is to compute the correct Tax payable for the current payment period.
  3. Record Payment Record payment is used to track your Tax payment in QuickBooks. You can use Record payment to track the payment for the current payment period or previous (missed) periods. After the Tax Payment, the payable account will typically be reset or cleared (i.e. zero balance). iv. Reports QuickBooks provides all the Sales Tax reports for both VAT / CST under reports drop down. This is mainly useful for reference, internal / external Audit, Tax preparation and filing. We discussed some of the reports such as URD Purchase, CST Sales with Form numbers in the above sections. The Tax Prep Report is useful for extracting all the necessary data from QuickBooks transactions for Sales Tax filing purpose. Here is a screen shot of the Tax Prep Report exported to excel. 13
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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