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Implementation of Value Added Tax in
Tally.ERP 9

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Version: Implementation of Value Added Tax in Tally.ERP 9/Release 3.2/July 2011

Contents

Contents
Introduction
Value Added Tax in India ......................................................................................................................... 1
General Terminologies of VAT ................................................................................................................ 2
Composite Dealers .................................................................................................................................... 3
Features of VAT in Tally.ERP 9 .............................................................................................................. 4

Lesson 1: Enabling VAT in Tally.ERP 9
1.1 Creating a Company ......................................................................................................................... 5
1.2 Enabling VAT ................................................................................................................................... 6
1.2.1 Quick Setup ................................................................................................................................................ 8

Lesson 2: Processing Purchases & Sales Entries
2.1 Taxable Purchases and Sales .......................................................................................................... 10
2.1.1 Purchase of Taxable Goods ..................................................................................................................... 10
2.1.2 Purchase Returns ..................................................................................................................................... 23
2.1.3 Sale of Taxable Goods ............................................................................................................................. 24
2.1.4 MRP Based Sales ..................................................................................................................................... 33
2.1.5 Sale on Item Rate with Display of MRP In Invoice ................................................................................. 34
2.1.6 Sales Returns ........................................................................................................................................... 38
2.2 Purchase and Sale of Exempt Goods .............................................................................................. 39
2.2.1 Exempted Purchases ................................................................................................................................ 39
2.2.2 Exempted Sales ........................................................................................................................................ 42
2.2.3 Sales Returns ........................................................................................................................................... 43
2.3 Inter-State Purchases and Sales ...................................................................................................... 44
2.3.1 Inter-State Purchases Against Form C .................................................................................................... 45
2.3.2 Interstate Purchases at Multiple CST Rates ............................................................................................ 47
2.3.3 Inter-State Sales Against Form C ............................................................................................................ 50
2.3.4 Inter-State Sales at Multiple CST Rates .................................................................................................. 52
2.3.5 Inter-state Sales under Sec. 10 ................................................................................................................ 54
2.4 Purchase from Un-registered Dealers ............................................................................................. 56
2.5 Exports ............................................................................................................................................ 61
2.6 Import .............................................................................................................................................. 65
2.7 Works Contract and Job Work ........................................................................................................ 69

Lesson 3: Reversal of Input Tax Credit
3.1 Goods used for Civil Structures ...................................................................................................... 77
3.2 Goods used for Consumption ......................................................................................................... 81
3.3 Purchase – Automobile Spare Parts from Non-Dealer of Automobile ........................................... 83
3.4 Purchase of Air Conditioners from Non-Dealer of Air Conditioners ............................................. 86
3.5 Goods Distributed as Free Samples & Gifts ................................................................................... 89

i

Contents

3.6 Goods Lost on Theft, Loss Etc. ...................................................................................................... 90
3.7 Inputs Damaged in Transit or Destroyed before Manufacture ....................................................... 92
3.8 Loss of Inputs by Fire or Accident ................................................................................................. 96
3.9 Unavailed Credit on Capital goods (Time Barred) ......................................................................... 97
3.10 Consignment/Branch Transfers without Form F .......................................................................... 98
3.10.1 Consignment Transfers without Form F ................................................................................................ 98
3.10.2 Reversal of Input Tax Credit on Consignment Sent without Form F .................................................. 102
3.10.3 Sales – Branch Transfers ..................................................................................................................... 103
3.10.4 Reversal of Input Tax Credit for Stock Transferred without Form F .................................................. 105
3.11 Purchases for Production of Exempted Goods (Finished) .......................................................... 106
3.12 Interstate Sale without 'C form ................................................................................................... 106
3.13 ITC Availed for Finished Goods Subsequently Exempt ............................................................ 110
3.14 Others (specify) ........................................................................................................................... 110

Lesson 4: Payment of VAT Liability
4.1 Advance Tax, Entry Tax and TDS Adjustment Entries ................................................................ 111
4.1.1 Adjustment Towards Advance Tax or Refund ........................................................................................ 111
4.1.2 Adjustment Towards Entry Tax Paid ..................................................................................................... 114
4.1.3 Adjustment Towards TDS ...................................................................................................................... 116
4.2 Adjustment of ITC against Tax Payable ....................................................................................... 119
4.3 Adjustment Towards CST Dues ................................................................................................... 120
4.4 Payment of VAT ........................................................................................................................... 121
4.5 Payment of CST ............................................................................................................................ 125

Lesson 5: VAT Reports
5.1 VAT Computation Report ............................................................................................................ 127
5.2 VAT Commodity Report .............................................................................................................. 134
5.3 VAT Registers .............................................................................................................................. 135
5.4 Statutory Returns and Annexures ................................................................................................. 139
5.4.1 VAT Return Form I ................................................................................................................................ 139
5.4.2 VAT Return Form I-1 ............................................................................................................................. 142
5.4.3 Form W .................................................................................................................................................. 143
5.4.4 VAT Annexures ...................................................................................................................................... 144

Lesson 6: E–VAT
6.1 Online Filing ................................................................................................................................. 153
6.2 Uploading in Excel Format ........................................................................................................... 153

ii

Introduction

Lesson Objectives
On completion of this lesson you will learn

 The concept of VAT
 The General terminologies of VAT

Value Added Tax in India
The Value Added Tax (VAT) is a type of indirect tax and is one of major source of revenue to the
state. The VAT system was introduced in India by replacing the General Sales Tax laws of each
state. Presently in India, out of 35 States and Union Territories, 33 are following this new system
of Sales Taxation. The States/Union territories which are yet to implement the VAT system are
Andaman and Nicobar Islands, Nagaland and Lakshadweep.
The VAT system of taxation was adopted by Indian States and Union Territories in the Year 2005
by replacing the General Sales Tax Laws with New Value Added Tax Acts and the supporting
Value Added Tax Rules for proper administration and collection of Tax. Each state or union
territory is having its own methods to assess the tax liability and collection methods from the
dealers who fall under the purview of VAT.
The Administration of VAT system was undertaken by the Commercial Taxes Department of each
state along with the Excise and other indirect taxes. For easy and quick assessment of taxation
and prevention of tax evasion, the department has introduced the Registration System. This
Registration system of VAT helps in identifying the assessees who come under the purview of
VAT and are liable to collect and pay VAT. For encouraging the Registration process some
benefits or concessions are given to the dealers.
The Registered dealers are allowed to collect VAT payable by them from the immediate buyer.
They can claim the VAT paid on purchases made only from a registered dealer. The unregistered
dealer cannot charge VAT on the invoices, so the buying dealer cannot claim the VAT amount

1

Introduction

paid as ITC. Also, the unregistered dealers are not eligible for availing concessions, for e.g.,
exemptions, which are given by the government.
The commercial tax department introduced a new method of levying tax called as the Composi-
tion Scheme especially after considering the small dealers whose turnover was low and were
unable to maintain the records as per the requirements of VAT Act. These dealers have to pay a
lump sum as VAT on the sale value of goods. The VAT paid will not be shown in the invoices.
They can account for the total turnover and pay VAT on the same at the end of their return period.
For Assessing the VAT liability of dealers, each state has introduced the system of Filing Returns
for different tax periods. The tax periods could be Monthly, Quarterly, Half-yearly and Annual.
Each dealer has to file the Return by specifying the total turnover which is exempted as well as
liable for VAT along with the purchases made and tax paid on it with the amount of VAT payable or
Input tax credit carried forward within the stipulated period.

General Terminologies of VAT
Input Tax
This is the tax paid on purchases

Output Tax
This is the tax charged on sales

Input Credit
The excess amount of Input tax over output tax for the current period which is permitted to be set
off against Output tax of subsequent periods is termed as Input Credit.

TIN
Tax Identification Number (TIN) is the Registration Number given by the department to the
dealer at the time of Registration. This needs to be quoted at all required places where the regis-
tration details are to be provided.

Tax Invoice
This is the Sales invoice format issued by one Registered Dealer to another. Based on this
Invoice, ITC can be claimed by the purchasing dealer.

Retail Invoice
The Sales invoice format used for invoicing the Exempted Sales and the Sales made to Unregis-
tered dealers is termed as Retail Invoice.

2

Introduction

Registered Dealer
This term is used to identify a dealer who is registered either under Voluntary Registration or
Compulsory Registration under the VAT Act. Such dealer can issue tax invoice and also claim the
tax paid on purchases made from other registered dealers as Input tax credit.

Unregistered Dealer
Dealers who are not registered under the VAT Act are called as Unregistered Dealers (URD).
Such dealers cannot issue tax invoice. They can neither Charge Tax nor Claim Input Tax Credit.

Purchase Tax
The Tax paid on goods purchased from unregistered dealers is liable to Purchase Tax. The
purchase tax is treated as Output VAT payable by the dealer as it is a liability. It has to be paid
while making the payment towards VAT liability. Based on the Rules and Regulations, the Input
Tax Credit can be claimed on the payment made towards Purchase Tax.

Reversal of Tax Credit
It refers to the reversal of input tax credit already claimed and availed.

Composite Dealers
The State Government may, by a notification in the Official Gazette, provide for a scheme of com-
position, subject to the tax, conditions and restrictions as may be provided therein, of tax payable
by the dealers who are engaged in the business, as prescribed, of re-selling at retail, any goods or
merchandise. Different types of schemes may be notified for different classes of retailers.
The composition scheme depends on the type of business covered by the Act. The dealers
engaged in trading of goods can get the business registered under composition scheme only if
the total annual turnover is not exceeding the specified Threshold turnover limits. The tax rates
are decided at pre-defined flat rates (for e.g., 8% on Gross Turnover). These rates differ
depending on the type of business.
The Composition dealers also have the option of voluntary registration. Unlike registered dealers,
the composite dealers need not maintain books of accounts and documents. They are also not
required to follow rules and procedures for issuing tax invoices, maintaining stocks etc.
The composition dealers cannot collect the tax amounts from their immediate registered/unregis-
tered dealers. The tax amounts also are not to be shown in the invoice. Such tax amount is
treated as the expenditure incurred for the business and allowed as business expenditure.
For example, the Karnataka Value added Tax, provides that a dealer whose turnover does exceed
fifteen Lakhs for four consecutive quarters, for e.g., works contractors, hoteliers, crushing units of
granites etc., can opt for composition scheme. According to this composition scheme, the rate of
tax applicable for other than crushing units is five percent and for crushing units, the tax is to be
paid on the basis of crushing machines ranging from Rupees one lakh to two Lakhs as applicable
from time to time.

3

Introduction

Difference between Regular and Composite Dealers
The following are the cases how the composition dealers are different from Regular Dealers:
 The Composition dealers cannot collect tax separately from the buyers as it is considered
as business expenditure, but the Regular dealer can collect tax.
 The Composition dealers cannot claim the tax paid on their purchases as Input tax credit
whereas the regular dealer can claim ITC.
 The composition scheme, is generally not applicable to the dealers who are engaged in
Inter-state trade or commerce. The Regular dealers can be engaged in inter-state trade.
 The dealers registered under Composition Scheme need not maintain books of accounts
and documents when compared to Regular dealer.

Features of VAT in Tally.ERP 9
The salient features provided for VAT in Tally.ERP 9 are as follows:
 Quick, easy to setup and use.
 Pre-defined VAT/Tax Classifications for Purchase and Sale of goods
 Facility to create separate VAT ledgers with VAT/Tax Classifications for input as well as out-
put VAT
 Facility to print tax invoice
 Complete tracking of each transaction till generation of returns
 Better VAT-returns management
 Generating of VAT Computation report with details pertaining to
 The value of transactions recorded using the classifications available for VAT
 Increase/decrease in input/output VAT on account of adjustment entries made using
the VAT Adjustments available on using the voucher class created for journal voucher.
 VAT Payable or refundable

 Generating of “VAT Classification Vouchers” report for each of the VAT/Tax classifications
 Facility to Drill-down the various VAT classifications from VAT Computation report till the
last level of voucher entry
 Generating VAT Returns and Annexure
 Greater tax compliance

4

Lesson 1: Enabling VAT in Tally.ERP 9

Lesson Objectives
On completion of this lesson, you will be able to

 Enable VAT in Tally.ERP 9
 Create Ledgers with VAT Classifications

1.1 Creating a Company
It takes a one-time configuration in Tally.ERP 9, to enable VAT. Let us take an example of the
following dealer to illustrate the same.

Example:
M/s. National Traders is a company engaged in trading of goods both within and outside the state.
On 1-4-2011, M/s. National Traders registers under the VAT Act as a dealer of goods.

Step 1:
Let us create a company and enable VAT
Go to Gateway of Tally > F3: Company Info. > Create Company
In the Company Creation screen,
1. Specify National traders as the Company Name
2. Enter the Address details
3. Select India in the Statutory Compliance for field
4. Select Tamil Nadu in the State field
5. Enter the Pin code, Telephone No., Mobile No. and E-Mail details
6. Set Enable Auto Backup to Yes if required.

5

Enabling VAT in Tally.ERP 9

7. Select Accounts with Inventory in the Maintain field
8. Enter the other required information in the Company Creation screen
The completed Company Creation screen is displayed as shown:

Figure 1.1 Company Creation screen

 Press Y or Enter to accept and save.

The List of States appear for selection only when India is selected in the
Statutory compliance for field. The state-specific VAT Compliance is
dependent upon the State selected. However, in the case of companies
already existing in Tally.ERP 9, VAT can be enabled in F11: Statutory &
Taxation features as explained in the next session.

1.2 Enabling VAT
Go to Gateway of Tally > F11: Features > F3: Statutory & Taxation
In the F3: Statutory & Taxation features,
1. Set Enable Value Added Tax (VAT) to Yes
2. Set Set/Alter VAT Details to Yes
3. The Company VAT Details screen will be displayed.
4. In the Company VAT Details screen, select the State where the business of the dealer is reg-
istered. Here select the State as Tamil Nadu. Select the Type of Dealer as Regular and enter
the Date in Regular VAT Applicable From field.

6


5. Under Additional Information section, new fields have been introduced to specify the details
pertaining to Assessment Circle, Division, Area Code, Import Export Code, Authorised
by, Authorised person, Status/Designation and Place. The details entered in these fields
will be captured in the Print Report screen of Return Form and Annexures as per require-
ment.

Figure 1.2 VAT Details screen

The details entered/modified manually in the fields of Print Report screen of
Return Form and Annexures will be captured in the forms as a one-time
measure. On exiting the screen, the temporarily modified details will not be
saved. Every time the report is generated, the information entered in the
Company VAT Details screen of F3: Statutory & Taxation Features will be
displayed.

6. Specify the details in VAT TIN (Regular), Inter-state Sales Tax Number and PAN / Income -
Tax Number.

7


 Enter the PAN/Income – Tax No

Figure 1.3 F3: Statutory & Taxation Features

7. Press Enter to accept and save.

1.2.1 Quick Setup
Quick Setup is a new feature being introduced with Tally.ERP 9. This is a Single Window Statutory
Masters Configuration screen which guides in configuring all the statutory masters (Accounts/
Inventory/Voucher Types) required for the effective use of Value Added Tax.
Click on Quick Setup option in Gateway of Tally. Select Value Added Tax to setup the masters
required for Value Added Tax. It consists of Company Setup to select the State, Type of Dealer
and enter the VAT Form specific information of the selected State in Additional Information
section. The masters specific to VAT provided in this setup is given below:
 Ledgers for Sales and Direct/Indirect Incomes
 Ledger for Purchases, Indirect/Direct Expenses and fixed asset treated as Capital Goods
 Tax Ledger for VAT and CST.
 VAT Commodity for tagging to stock item and reflecting in Forms.
 Party ledgers for providing VAT and Interstate Sales Tax Numbers
 Additional ledgers for apportioned and separately charged expenses.
 Stock Item to be used while recording transactions attracting VAT
 Voucher Class for Journal Voucher and configuring Sales Voucher Type as Tax Invoice.

8

Lesson 2: Processing Purchases & Sales Entries

Lesson Objectives

 Record Purchase and Sales transactions at different VAT rates
 Record transactions with additional expenses
 Record transactions using Credit Note and Debit Note
 Generate Tax Invoice

A VAT registered dealer, while purchasing goods within the state pays Input VAT and charges
Output VAT at the time of sales on the assessable value of taxable goods. At the end of each
month they are required to compute Input VAT paid on purchases made during the month and
Output VAT payable on sales during the month. If the VAT payable is more than the Input VAT
paid on purchases, the difference is payable to the government or in case where the Input VAT
paid on purchases is in excess of Output VAT payable during the month, the excess VAT paid is
carried forward to the next month.

9

Processing Purchases & Sales Entries

2.1 Taxable Purchases and Sales
2.1.1 Purchase of Taxable Goods
Example 1:
On 2-4-2011, National Traders purchased the following items from Excel Traders vide invoice
number 01:

Item Description Quantity (in Nos) Rate Amount VAT Commodity Code
Gold Jewellery 9 20,000 1,80,000 1% 102
GI Pipes 160 150 24,000 2% 2100
Insulators 150 320 48,000 4% 2069
Silk Fabrics 10 5,000 50,000 4% 2127
Vacuum Cleaner 8 15,000 1,20,000 12.5% 329

An amount of ` 5,000 was paid as packing charges which was included in the invoice.

Step 1:
Let us create the required Masters to record the above transaction.
Creating Ledgers
i. Purchase Ledger
To create a Purchase Ledger
Go to Gateway of Tally > Accounts Info > Ledgers > Create
1. Enter the Name as Purchases @ 1%
2. Select Purchase Accounts as the account group in the Under field
3. Set Inventory values are affected to Yes
4. Set the option Used In VAT Returns to Yes to display the VAT/Tax Class sub-screen.

10


5. Select Purchases @ 1% as the VAT/Tax Class from the list of VAT/Tax Class as shown:

Figure 2.1 Purchase Ledger – Used In VAT Returns
6. Press Enter to return to the Purchases @ 1% ledger creation screen and set the option Use
for Assessable Value Calculation to No

Figure 2.2 Purchase Ledger – Completed

11


7. Press Y or Enter to accept and save.
Inthe VAT/Tax class screen, the Activated From column will display the
date of activation of particular classification in the current financial year.
The Deactivated From column will show the date of deactivation irre-
spective of the financial year.
Inorder to use the same purchase ledger as additional ledger, the option
Use for Assessable Value Calculation needs to be set to Yes after dis-
abling Inventory values are affected to apportion the additional amount
towards assessable value and tax amount.

Similarly, create the following purchase ledgers:

Name Under Inventory Used in VAT/Tax Class Use for
Group values are VAT Assessable
affected Returns Value Calculation
Purchases @ Purchase Yes Yes Purchases @ 2% No
2% Accounts
Purchases @ Purchase Yes Yes Purchases @ 4% No
4% Accounts
Purchases @ Purchase Yes Yes Purchases @ 12.5% No
12.5% Accounts

ii. Input VAT on Purchase Ledger
To create an Input VAT ledger,
Go to Gateway of Tally > Accounts Info. > Ledgers > Create
1. Enter the Name as Input VAT @ 1%
2. Select Duties & Taxes as the group name in the Under field
3. Select VAT from the Type of Duty/Tax list in the field Type of Duty/Tax
4. Set the VAT Sub Type as Input VAT

The field - VAT Sub Type is introduced in ledger masters grouped under
Duties & Taxes with Type of Duty/Tax as VAT. Based on selection of VAT
Sub Type as Input VAT or Output VAT, the VAT/Tax classifications are listed
in VAT/Tax Class field. Also the VAT payable amount gets auto calculated in
Payment voucher on using Stat Payment based on the VAT Sub Type
selected in ledger master.

12


5. Select Input VAT @ 1% in the VAT/Tax Class field from the VAT/Tax Class list displayed

Figure 2.3 Input VAT – VAT/Tax Class Selection

6. The option Inventory values are affected is set to No by default
7. The Percentage of Calculation and Method of Calculation will be displayed based on the
VAT/Tax Class selected
8. Select the required Rounding Method from the list displayed

Similarly, create the following input VAT ledgers:

Name Under Type of VAT VAT/Tax Inventory Percentage Method of
Group Duty/Tax Sub Class values are of Calcula- Calcula-
Type affected tion tion
Input VAT Duties VAT Input Input VAT No 2% On VAT
@ 2% & Taxes VAT @ 2% Rate
Input VAT Duties VAT Input Input VAT No 4% On VAT
@ 4% & Taxes VAT @ 4% Rate
Input VAT Duties VAT Input Input VAT No 12.5% On VAT
@ 12.5% & Taxes VAT @ 12.5% Rate

13


iii. Packing Charges
To create a ledger for packing charges,
1. Enter the Name as Packing Charges
2. Select Direct Expenses as the group name in the Under field
4. Set the option Use for Assessable Value Calculation to Yes
5. In the Apportion for field select VAT and set the Method of Apportion to Based on Quantity

Figure 2.4 Packing Charges Ledger


14


In the ledgers grouped under Direct/Indirect Expenses, Direct/Indirect
Incomes, Purchase Accounts and Sales Accounts, the fields Use for
Assessable Value Calculation will be displayed. On enabling this field, the
options Apportion for and Method of Apportion will be displayed. In the
Apportion for field:
The option VAT will be displayed when only VAT feature is enabled.
 Excise & VAT and VAT will be displayed on enabling both Excise and
VAT features.
On selecting the Method of Apportion as VAT, the value of these ledgers
apportioned towards assessable value will be considered for VAT calculation.
On selecting the Method of Apportion as Excise & VAT, the value of these
ledgers apportioned towards assessable value will be used for Excise and
VAT calculation.

iv. Creating a Sundry Creditor Ledger
To create a Sundry Creditor (Supplier) ledger,
Go to Gateway of Tally > Accounts Info. > Ledger > Create
Click on F12: Configure button and set the field Use ADDRESSES for Ledger Accounts to Yes.
In the Ledger creation screen,
1. Enter the Name as Excel Traders
2. Select Sundry Creditors in the Under field
3. Set Maintain balances bill-by-bill to Yes and enter the Default Credit Period if any
4. In the Mailing Details section
 The Name will be displayed as Excel Traders
 Enter the Address details
 Select the State as Tamil Nadu and enter the PIN Code

15


5. In the Tax Information section enter the PAN / IT number and enable Set/Alter VAT Details
field as shown:

Figure 2.5 Sundry Creditor – Excel Traders

6. In the VAT Details screen, enter the TIN/Sales Tax Number as shown:

Figure 2.6 VAT Details – Sundry Creditor Ledger

7. Accept the VAT Details screen
8. Accept the Sundry Creditor Ledger Creation screen.

v. Creating VAT Commodity
To create a VAT Commodity
Go to Gateway of Tally > Inventory Info. > VAT Commodity > Create
1. Enter the Name of VAT Commodity as Jewellery

16


2. In the Used for field, select VAT

Figure 2.7 VAT Commodity Creation – VAT

3. In the VAT section, enter the Commodity Code, Schedule Number and Schedule Serial
Number as shown:

Figure 2.8 VAT Commodity Creation screen

4. Enter the Notes if required and accept the VAT Commodity Creation screen.

In the Inventory Info. menu, the commodity code or tariff classification can
be created from:
 VAT Commodity sub-menu for VAT enabled companies
 Tariff/VAT Commodity sub-menu for companies in which both VAT and
Excise feature/excise rules for invoicing is enabled.
In Commodity Creation screen, the HSN code can be entered only when the
Used for option is selected as Both or Excise only. If VAT is selected, the
cursor will skip the HSN Code and prompt for information under VAT details
section.

17


Similarly, create the following VAT Commodities:
VAT
Sl.
Name Used For Commodity Schedule Number Schedule
No.
Code Serial Number
1 G I Pipes VAT 2100 First Schedule – Part B 100
2 Insulators VAT 2069 First Schedule – Part B 69
3 Vacuum Cleaners VAT 329 First Schedule – Part C 28
4 Silk Fabrics VAT 2127 First Schedule – Part B 127

vi. Stock Items
To create a stock item,
Go to Gateway of Tally > Inventory Info. > Stock Items > Create
1. Enter the Name as Gold Jewellery
2. Select the group as Primary in the Under field
3. Select the unit of measurement as Nos in the Units field. (The Unit of Measure can be cre-
ated by using the key combination Alt+C in the Units field)
4. In the Commodity field, select the VAT Commodity as Gold Jewellery.
The VAT Commodity Code will also be displayed along with the Commodity Name in the List of
VAT Commodities as shown:

Figure 2.9 Stock Item Creation – Selection of VAT Commodity

18


5. Enter the Rate of VAT as 1%. The completed stock item creation screen displays as shown:

Figure 2.10 Stock Item Creation screen

Similarly, create the other stock items as per the details given below:
VAT Details
Sl. No Name Under Units
Commodity Rate of VAT
1 G I Pipes Primary Nos G I Pipes 2%
2 Insulators Primary Nos Insulators 4%
3 Silk Fabrics Primary Nos Silk Fabrics 4%
4 Vacuum Cleaners Primary Nos Vacuum Cleaners 12.5%

In the Stock Item master of a company enabled only for VAT, the cursor will
skip the Tariff Classification field and prompt for entering the Rate of Duty
and selection of Commodity under VAT Details section.
The commodity code will be captured in the VAT Annexures based on the
selection made from the:
Listof Tariff Classifications (on enabling Excise and VAT) of Tariff/VAT
Commodity screen
List of VAT Commodities of VAT Commodity screen
The HSN code will not be captured in the Annexures.

19


Step 2:
Let us now enter the purchase transaction in Tally.ERP 9
To create Purchase Voucher,
Go to Gateway of Tally > Accounting Vouchers > F9: Purchase
In F12: Purchase Invoice Configuration, set Use Common Ledger A/c for Item Allocation to
No
1. Select As Invoice mode (use key combination Ctrl+V if the screen is displayed in voucher
mode. The invoice mode will be displayed)
2. Enter the Supplier Invoice number and Date
3. Select Excel Traders in the Party’s A/c Name field from the List of Ledger Accounts
4. In the Party Details screen, enter/modify the required details
5. Select the Name of Item as Gold Jewellery from the List of Items
6. Enter the Quantity as 9 and Rate as 20,000. The value is automatically displayed in the
Amount field
7. In the Accounting Details screen, select Purchases @ 1% from the List of Ledger
Accounts. The VAT/Tax Class will automatically be displayed as Purchases @ 1%
8. Select the next stock item as G I Pipes. Enter the Quantity as 160 and Rate as 150
10. Select the next stock item as Insulators. Enter the Quantity as 150 and Rate as 320
12. Select the next stock item as Silk Fabrics. Enter the Quantity as 10 and Rate as 5,000
14. Select the next stock item as Vacuum Cleaner. Enter the Quantity as 8 and Rate as 15,000
15. In the Accounting Details screen, select Purchases @ 12.5% from the List of Ledger
Accounts. The VAT/Tax Class will automatically be displayed as Purchases @ 12.5%
16. Select Packing Charges ledger and enter the amount as 5,000
17. Select the ledgers Input VAT @ 1%, Input VAT @ 2%, Input VAT @ 4% and Input VAT @
12.5% and the respective values will be automatically calculated

20


18. Set the field Show Statutory Details to Yes

Figure 2.11 Purchase Invoice – Show Statutory Details

21


19. Press Enter to view the Statutory Details screen

Figure 2.12 Purchase Invoice – Statutory Details screen

20. Accept the Statutory Details screen
21. Accept the default Bill allocations in the Bill-wise Details screen
22. Enter the Narration if required
23. Accept the Purchase Invoice.

In a transaction where Cash Ledger is selected in the Party’s A/c Name
field, the required party ledger can be selected in the Supplementary Details
screen by using the Alt+M: Party List button. On selecting the party ledger,
the Address and the TIN/Sales Tax Number will be captured from the ledger
master and displayed. The TIN and address will be displayed in Annexure I
and II.

22


2.1.2 Purchase Returns
In cases where the purchasing dealer has returned the goods to the seller for any reason, the
input tax credit already claimed on the purchase by the dealer shall be liable to reversal of tax
credit on such goods returned, in the manner as may be prescribed.

Example 2:
On 4-4-2011, M/s National Traders returned 10 damaged insulators worth ` 320 each to Excel
Traders against the purchase dated 1-4-2011 vide invoice number 01.

Step 1:
Let us record the transaction in Tally.ERP 9
To create a debit note for purchase returns,
In F11: Features > F1: Accounting Features, enable the following options:
 Use Debit/Credit Notes
 Use Invoice mode for Debit Notes
Go to Gateway of Tally > Accounting Vouchers > Ctrl+F9: Debit Note
In F12: Debit Note Configuration, set Use Common Ledger A/c for Item Allocation to Yes
1. Press the toggle key Ctrl+V to select the option As Invoice.
2. Enter the reference number in the Ref. field.
3. Select the Purchase Returns Or Rejected flag from list of VAT Adjustments in the field Used
For
4. Select Excel Traders in the Party’s A/c Name field from the List of Ledger Accounts
6. Select Purchases @ 4% ledger from the List of Ledger Accounts.
7. On selecting the Purchases @ 4% Ledger, the VAT/Tax Class appears as Purchases @ 4%
8. Select the Name of Item as Insulators from the List of Items. Enter the Quantity as 10, the
Rate and Amount will be displayed automatically
9. Select Input VAT @ 4% and the value will be automatically calculated and displayed
10.The field Show Statutory Details will be set to No

23


12. Enter the Narration, if required

Figure 2.13 Debit Note – Purchase Returns

13. Press Y or Enter to accept the voucher.

2.1.3 Sale of Taxable Goods
Example 3:
On 5-4-2011, National Traders sold the following items to Marvel Traders vide invoice number
S01:

Item Description Quantity (in Nos) Rate Amount VAT Commodity Code
Gold Jewellery 4 22,500 90,000 1% 102
GI Pipes 70 400 28,000 2% 2100
Insulators 65 500 32,500 4% 2069
Vacuum Cleaner 5 17,500 1,40,000 12.5% 329

An amount of ` 10,000 was charged as packing charges which was included in the invoice.

24


Step 1:

Creating Ledgers
i. Sales Ledger
To create a sales Ledger
1. Enter the Name as Sales @ 1%
2. Select Sales Accounts as the account group in the Under field
4. Set the option Used In VAT Returns to Yes to display the VAT/Tax Class sub-screen

Figure 2.14 Sales Ledger – Used In VAT Returns

25


5. Select Sales @ 1% as the VAT/Tax Class from the list of VAT/Tax Class

Figure 2.15 Sales Ledger – VAT/Tax Class Selection

6. Press Enter to return to the Sales @ 1% ledger creation screen
7. Set the option Use for Assessable Value Calculation to No

Similarly, create the following purchase ledgers:

Name Under Inventory Used in VAT/Tax Class Use for Assessable
Group values are VAT Value Calculation
affected Returns
Sales @ 2% Sales Yes Yes Sales @ 2% No
Accounts
Sales @ 4% Sales Yes Yes Sales @ 4% No
Accounts
Sales @ 12.5% Sales Yes Yes Sales @ 12.5% No
Accounts

26


ii. Output VAT on Sales Ledger
To create an Output VAT ledger,
Go to Gateway of Tally > Accounts Info. > Ledgers > Create
1. Enter the Name as Output VAT @ 1%
2. Select Duties & Taxes as the group name in the Under field
3. Select VAT from the Type of Duty/Tax list in the field Type of Duty/Tax
4. Select the VAT Sub Type as Output VAT
5. Select Output VAT @ 1% in the VAT/Tax Class field from the VAT/Tax Class list displayed

Figure 2.16 Output VAT – VAT/Tax Class Selection

7. The Percentage of Calculation and Method of Calculation will be displayed based on the
VAT/Tax Class selected
8. Select the required Rounding Method from the list displayed
9. Accept to save the output VAT Ledger.

27


Similarly, create the following output VAT ledgers:

Name Under Type of VAT VAT/Tax Inventory Percent- Method
Group Duty/ Sub Class values are age of Cal- of Cal-
Tax Type affected culation culation
Output VAT Duties VAT Output Output No 2% On VAT
@ 2% & Taxes VAT VAT @ 2% Rate
Output VAT Duties VAT Output Output No 4% On VAT
@ 4% & Taxes VAT VAT @ 4% Rate
Output VAT Duties VAT Output Output VAT No 12.5% On VAT
@ 12.5% & Taxes VAT @ 12.5% Rate

iii. Creating Tax Invoice
To create a Tax Invoice,
Go to Gateway of Tally > Account Info. > Vouher Types > Create
1. Enter the Name as Tax Invoice.
2. Select Type of Voucher as Sales and enter the Abbreviation for it as per requirement.
3. Set Is Tax Invoice to Yes.
4. Retain the other default fields.
5. Accept the Tax Invoice Voucher Type.

iv. Creating a Sundry Debtor Ledger
To create a Sundry Debtor (Customer) ledger,
Go to Gateway of Tally > Accounts Info. > Ledger > Create
Click on F12: Configure button and set the field Use ADDRESSES for Ledger Accounts to Yes.
In the Ledger creation screen,
1. Enter the Name as Marvel Traders
2. Select Sundry Debtors in the Under field
3. Set Maintain balances bill-by-bill to Yes and enter the Default Credit Period if any
4. In the Mailing Details section
 The Name will be displayed as Marvel Traders
 Enter the Address details
 Select the State as Tamil Nadu and enter the PIN Code

28


5. In the Tax Information section enter the PAN number and enable Set/Alter VAT Details

Figure 2.17 Sundry Debtor – Marvel Traders

6. Enter the TIN/Sales Tax Number

Figure 2.18 Marvel Traders – VAT Details

7. Accept the VAT Details screen
8. Accept the Sundry Debtor ledger.

Step 2:
Let us enter the transaction in Tally.ERP 9. To create a tax invoice,
Go to Gateway of Tally > Accounting Vouchers > F8: Sales > Select Tax Invoice as the
Voucher Type
1. Enter the reference in the Ref. field, if required.
2. Select Marvel Traders in the Party’s A/c Name field from the List of Ledger Accounts.

29


3. Enter the Despatch Details in the Party Details screen
Amount field
6. In the Accounting Details screen, select Sales @ 1% from the List of Ledger Accounts. The
VAT/Tax Class will automatically be displayed as Sales @ 1%
7. Select the next stock item as G I Pipes. Enter the Quantity as 70 and Rate as 400
8. In the Accounting Details screen, select Sales @ 2% from the List of Ledger Accounts. The
VAT/Tax Class will automatically be displayed as Sales @ 2%
10. In the Accounting Details screen, select Sales @ 4% from the List of Ledger Accounts.
The VAT/Tax Class will automatically be displayed as Sales @ 4%
12. In the Accounting Details screen, select Sales @ 12.5% from the List of Ledger Accounts.
The VAT/Tax Class will automatically be displayed as Sales @ 12.5%
13. Select Packing Charges ledger and enter the amount as 10,000
14. Select the ledgers Output VAT @ 1%, Output VAT @ 2%, Output VAT @ 4% and Output
VAT @ 12.5% and the respective values will be automatically calculated and displayed
15. Set the field Show Statutory Details as Yes

Figure 2.19 Sales Invoice – Show Statutory Details Field

30


16. In the Statutory Details click on Alt+F1: Detailed mode and the screen displays as shown:

Figure 2.20 Sales Invoice – Statutory Details screen

17. Accept the Statutory Details screen
19. Enter the Narration if required and accept the sales invoice.
20. Press Pg Up key to view the sales invoice in alteration mode
21. Press F11: Features > F1: Accounting Features and set Enable Company Logo to Yes. In
the CMP CompanyLogo Path screen, enter the path of the company logo in Location of Logo
field with the name of the image and file extension, for e.g., C:Tally.ERP9Logo.jpg
22. Accept the F1: Accounting Features and press Alt+P to print the invoice.
23. Click F12: Configure. In the Invoice Print Configuration, set the options as given below:
 Print Company Logo to Yes to print the company logo in the tax invoice. The Location of
Logo field will display the logo path entered in the F1: Accounting Features screen so
accept the same.
 Print VAT/CST Analysis of Items to Yes to display the VAT Amount charged in words.
 Print VAT/CST % Column to Yes to display the percentage-wise breakup of VAT rate and
amount columns along with Assessable value
 Print Base Currency Symbol for Total to Yes to display the ` symbol before the total
amount.
24. The remaining fields can be configured as per requirement.

31


The print preview of the taxable sales invoice displays as shown:

Figure 2.21 Print Preview of Sales Invoice

For printing the Company logo ensure that the logo size is of 96 x 80 pixels.
If it is not of this dimension, open the logo in MS Paint application, click on
Home > Resize. In the resize window, select pixels, uncheck Maintain
Aspect Ratio and enter the pixels for Horizontal as 96 and Vertical as 80.
Click on OK to accept. Copy the resized logo in the Logo file path and then
print the invoice.

32


2.1.4 MRP Based Sales
Example 4:
On 6-4-2011, National Traders sold 66 nos of G I Pipes (priced at ` 400) to Marvel Traders vide
invoice number S02 for MRP rate of ` 350.

Step 1:
Let us modify the required Masters to record the above transaction.

Stock Item - G I Pipes
Go to Gateway of Tally > Inventory Info. > Stock Items > Alter > G I Pipes
Press F12: Configure and set Calculate VAT on MRP/Marginal to Yes. Accept the F12: Stock
Item Configuration and stock item alteration screen.

Step 2:
Voucher Type
In F12: Sales Invoice Configuration, set Use Common Ledger A/c for Item Allocation to Yes
3. Enter the Despatch Details in the Party Details screen.
4. Select Sales @ 2% ledger from the List of Ledger Accounts.
5. On selecting the Sales @ 2% Ledger, the VAT/Tax Class appears as Sales @ 2%
6. Select the Name of Item as G I Pipes from the List of Items. Enter the Quantity as 66, the
Rate appears as 400 and Amount will be displayed automatically.
7. In MRP/Marginal field, enter ` 350.
8. Select Output VAT @ 2% and the value will be automatically calculated based on MRP rate
(66 * 35 = 23,100 * 2/100 = 462).
9. The field Show Statutory Details will be set to No

33


11. Enter the Narration if required.

Figure 2.22 Sales – MRP Based

12.Press Y or Enter to accept the voucher.
While printing the invoice press F12: Configure and set Print MRP/Marginal Column to Yes.
The MRP rate entered in the invoice will be printed.

2.1.5 Sale on Item Rate with Display of MRP In Invoice
Example 5:
On 6-4-2011, National Traders sold 65 nos of G I Pipes at ` 500/nos to Marvel Traders vide
invoice number S03 by showing the MRP rate of ` 450 in the invoice.

Step 1:
Let us modify the required Masters to record the above transaction.

Stock Item - Insulators
Go to Gateway of Tally > Inventory Info. > Stock Items > Alter > G I Pipes
Press F12: Configure and set Calculate VAT on MRP/Marginal to Yes. Set Use MRP to Print to
Yes.

34


The stock item displays as shown:

Figure 2.23 Stock Item – Use MRP to Print

Press Y or Enter to accept and save.

Step 2:
Voucher Type
3. Enter the Despatch Details in the Party Details screen.
6. Select the Name of Item as Insulators from the List of Items. Enter the Quantity as 65, the
Rate appears as 500 and Amount will be displayed automatically.
7. In MRP/Marginal field, enter ` 450.
8. Select Output VAT @ 4% and the value will be automatically calculated based on item rate
and not the MRP rate (32,500 * 4/100 = 1,300).

35


11. Enter the Narration if required.

Figure 2.24 MRP Based Sales – Completed

12.Press Y or Enter to accept the voucher.
In the F12: Configure of Voucher printing screen, set Print MRP/Marginal Column to Yes.

36


The print preview of tax invoice with output VAT calculated on Item rate with display of MRP rate
appears as shown:

Figure 2.25 Tax Invoice - Output VAT Calculation on Item Rate with Display of MRP

37


2.1.6 Sales Returns
Where a selling dealer has received back the goods as a result of sales return or unfructified sale,
the output tax paid or payable thereon will be reduced, adjusted or refunded in the manner as may
be prescribed.

Example 6:
On 6-4-2011, M/s National Traders received 15 nos of G I Pipes returned by Marvel Traders
against the sales dated 5-4-2011 vide invoice number S01.

Step 1:
To create a credit note for sales returns,
In F11: Features > F1: Accounting Features, enable the option Use Invoice mode for Credit
Notes
Go to Gateway of Tally > Accounting Vouchers > Ctrl+F8: Credit Note
1. Press the toggle key Ctrl+V to select the option As Invoice.
3. Select the Goods Sold Returned flag from list of VAT Adjustments in the field Used For
4. Select Marvel Traders in the Party’s A/c Name field from the List of Ledger Accounts
8. Select the Name of Item as G I Pipes from the List of Items (In the stock item master, press
F12; Configure and set Calculate VAT on MRP/Marginal to No). Enter the Quantity as 15, the
Rate and Amount will be displayed automatically
9. Select Output VAT @ 2% and the value will be automatically calculated and displayed
10.The field Show Statutory Details will be set to No

38



Figure 2.26 Credit Note – Sales Returns


2.2 Purchase and Sale of Exempt Goods
Exempted Sales refers to the sale of goods which are exempted from VAT by notification, from
time to time.

2.2.1 Exempted Purchases
Example 7:
On 3-4-2011, National Traders purchased 200 nos of the periodical – The IT Journal for ` 150
each from M/s. Swasthik Associates, Chennai vide invoice number 02.

Step 1:

39


Creating Ledgers
i. Purchases – Exempt Ledger
Create the Purchases – Exempt Ledger with the following details:

Name Under Inventory Used in VAT/Tax Use for Assessable
values are VAT Class Value Calculation
affected Returns
Purchases – Purchases Yes Yes Purchases – No
Exempt Accounts Exempt

ii. Creating a Sundry Creditor Ledger
Create the sundry creditor ledger – Swasthik Associates by following the steps given in
Example 1.

iii. VAT Commodity
Create the VAT Commodity with the details given in the following table:
VAT
Sl.
No.
Code Serial Number
1 Periodicals VAT 711 Fourth Schedule – Part B 11

iv. Stock Item – The IT Journal
Create the stock item with the details as given in the following table:
VAT Details
Name Under Units
The IT Journal Primary Nos Periodicals 0%

Step 2:
To create a purchase exempt voucher,
Go to Gateway of Tally > Accounting Vouchers > F9: Purchases
In the F12: Purchase Invoice Configuration, set the option Use Common Ledger A/c for Item
Allocation to Yes
2. Select the Party’s A/c Name as Swasthik Associates from the List of Ledger Accounts.

40


3. Select Purchases – Exempt ledger from the List of Ledger Accounts.
4. On selecting the Purchase – Exempt Ledger, the VAT/Tax Class appears as Purchases –
Exempt automatically
5. Select the Name of Item as The IT Journal from the List of Items
6. Enter the Quantity as 200 and Rate as 150. The amount is automatically displayed in the
Amount field
10.The completed Purchases Voucher screen is displayed as shown:

Figure 2.27 Purchase – Exempt Invoice

11. Press Y or Enter to accept.

41


2.2.2 Exempted Sales
Example 8:
On 7-4-2011, National Traders sold 180 nos of The IT Journal for ` 200 to Supreme Book Stores,
Chennai vide invoice number SN01.

Step 1:
Let us create the necessary masters to record the above transaction.

Creating Ledgers
i. Sales – Exempt
To create a Sales – Exempt Ledger
Create the Sales – Exempt Ledger with the following details:

values are VAT Assessable
Sales – Exempt Sales Accounts Yes Yes Sales – Exempt No

ii. Sundry Debtor Ledger
Create the sundry debtor ledger - Supreme Book Stores by following the steps given in Example
3.

Step 2:
1. Enter the reference number in the Ref field
2. Select the Party’s A/c Name as Supreme Books Store from the List of Ledger Accounts.
3. Select Sales – Exempt ledger from the List of Ledger Accounts.
4. On selecting the Sales – Exempt Ledger, the VAT/Tax Class appears as Sales – Exempt
automatically
5. Select the Name of Item as The IT Journal from the List of Items
Amount field
8. Accept the default bill allocations in the Bill-wise Details screen

42


10.The completed Sales Voucher screen is displayed as shown:

Figure 2.28 Sales – Exempt Invoice


2.2.3 Sales Returns
Example 9:
On 8-4-2011, M/s National Traders received 10 nos of The IT Journal sold to Supreme Book
Stores on 7-4-2011 vide invoice number SN01.

Step 1:
To create a credit note for sales returns,
Go to Gateway of Tally > Accounting Vouchers > Ctrl+F8: Credit Note
2. Select the Goods Sold Returned flag from list of VAT Adjustments in the field Used For
3. Select Supreme Book House in the Party’s A/c Name field from the List of Ledger
Accounts

43


5. Select the Name of Item as The IT Journal from the List of Items. Enter the Quantity as 10,
the Rate and Amount will be displayed automatically
6. In the Accounting Details screen, select Sales – Exempt from the List of Ledger Accounts.
The VAT/Tax Class will automatically be displayed as Sales – Exempt

Figure 2.29 Credit Note – Exempt Sales Returns


2.3 Inter-State Purchases and Sales
A registered CST dealer purchases and sells goods outside the state and pays the CST (Central
Sales Tax). Generally, the CST paid on purchases from outside the state (i.e., Inter-state Pur-
chases) is neither allowed to set-off against Output VAT (VAT collected on Sales within the state)
payable nor against Output CST (CST collected on Inter-state Sales) payable. Thus, the CST paid
on Inter-state purchases is treated as part of procurement cost or the cost of purchases. However,
in case of Inter-state Sales, ‘Input VAT’ can be adjusted against ‘Output CST’ payable during the
month.
The assessable value of inter-state purchases and sales turnover, CST paid and collected on the
inter-state transactions are captured and reported separately in Annexures and CST Returns.

44


2.3.1 Inter-State Purchases Against Form C
Example 10:
On 8-4-2011, M/s National Traders purchased 15 nos of Air Conditioners from Sunlite Enterprises,
Mumbai for ` 25,000 each vide Invoice No. 03, by issuing C Form. CST @ 2% was charged while
invoicing.

Step 1:
Let us create the necessary masters to record the above transaction:

i. Inter-State Purchases Ledger
Create the inter-state purchase ledger with the details as given in the following table:
Ledger Under Inventory Values Used in VAT VAT/Tax Class
Group are affected Returns
Interstate Pur- Purchase Yes Yes Interstate Purchases @
chases @ 2% Accounts 2% Against Form C

ii. CST on Purchase Ledger
Create the input CST ledger with the details as given in the following table:

Name Under Type of VAT/Tax Class Inventory Percentage Method of
Group Duty/ values are of Calcula- Calculation
Tax affected tion
CST-2% Duties CST Interstate No 2% On VAT
(Purchase) & Taxes Purchases @ 2% Rate
Against Form C

iii. Sundry Creditor Ledger
Create the sundry creditor ledger – Sunlite Enterprises by following the steps given in Example 1.

iv. VAT Commodity Creation
Create the VAT Commodity with the following details:
VAT
Sl.
No.
Code Serial Number
1 Air Conditioners VAT 304 First Schedule – Part C 3

45


v. Stock Item – Air Conditioner
VAT Details
Name Under Units
Air Conditioner Primary Nos Air Conditioners 12.5%

Step 2:
Let us enter the purchase transaction in Tally.ERP 9

2. Select Sunlite Enterprises in the Party’s A/c Name field from the List of Ledger Accounts
4. Select Interstate Purchases @ 2% ledger in the Purchase Ledger field from the List of
Ledger Accounts
5. On selecting the Interstate Purchase @ 2% ledger, the VAT/Tax Class appears as Interstate
Purchases @ 2% Against Form C
6. Select the Name of Item as Air Conditioner from the List of Items
Amount field
8. Select CST-2% (Purchase) ledger from the List of Ledger Accounts and the rate appears as
2%. The amount of CST will get calculated automatically and will form part of the purchase
cost.
9. Select Form C as Form to Issue. Enter the Form Series Number, Form number and Date
11. Accept the default Bill Allocation in the Bill-wise Details screen

46



Figure 2.30 Interstate Purchases against Form C


2.3.2 Interstate Purchases at Multiple CST Rates
Example 11:
On 9-4-2011, National Traders purchased the following items from Sunlite Enterprises vide
invoice number 04:

Item Description Quantity (in Nos) Rate Amount CST
Gold Jewellery 2 20,000 40,000 1%
Insulators 30 320 9,600 4%
Vacuum Cleaner 2 15,000 30,000 12.5%

Step 1:

47


i. Inter-State Purchase Ledgers
Create the Interstate Purchase Ledgers with the following details

Interstate Purchase Yes Yes Interstate No
Purchases @ Accounts Purchases @ 1%
1%
Purchases @ Accounts Purchases @ 4%
4%
Purchases @ Accounts Purchases @
12.5% 12.5%

ii. CST on Purchase Ledgers
Create the CST on Purchase Ledgers with the following details

Name Under Type of VAT/Tax Class Inventory Percentage Method of
Group Duty/Tax values are of Calcula- Calcula-
affected tion tion
CST-12.5% Duties CST Interstate No 12.5% On VAT
(Purchase) & Taxes Purchases @ Rate
12.5%

iii. Sundry Debtor Ledger
Create the sundry creditor ledger – Universal Enterprises by following thesteps given in Example
1.

Step 2:
Let us enter the purchase transaction in Tally.ERP 9

2. Select Sunlite Enterprises in the Party’s A/c Name field from the List of Ledger Accounts

48


Amount field
6. In the Accounting Details screen, select Interstate Purchases @ 1% from the List of
Ledger Accounts. The VAT/Tax Class will automatically be displayed as Interstate Pur-
chases @ 1%
8. In the Accounting Details screen, select Interstate Purchases @ 4% from the List of
chases @ 4%
10. In the Accounting Details screen, select Interstate Purchases @ 12.5% from the List of
chases @ 12.5%
11. Select the ledgers CST-1%(Purchase), CST-4%(Purchase) and CST-12.5%(Purchase) and
the respective values will be automatically calculated
12. The field Show Statutory Details to No. Retain the same setting.

Figure 2.31 Interstate Purchases at Multiple CST Rates


49


2.3.3 Inter-State Sales Against Form C
Example 12:
On 9-4-2011, M/s National Traders sold 5 Nos. of Air Conditioners to Digilink Traders, Hyderabad
for ` 28,000 each vide Invoice No. SN03 against Form C. Packing charges amounted to ` 4,500.
CST @ 2% was charged while invoicing.

Step 1:

i. Inter-State Sales Ledger
Create the inter-state sales ledger with the details as given in the following table:
are affected Returns
Interstate Sales Sales Yes Yes Interstate Sales @ 2%
@ 2% Accounts Against Form C

ii. CST @ 2% Ledger
Create the CST @ 2% ledger with the details as given in the following table:
Ledger Under Type of VAT/Tax Class Inventory Percentage Method of
Duty / Values are of calcula- Calculation
Tax affected tion
CST @ Duties CST CST @ 2% No 2% On VAT
2% & Taxes Against Form C Rate

Create the sundry debtor ledger – Digilink Traders by following the steps given in Example 3.

Step 2:
Let us now enter the sales transaction in Tally.ERP 9
To create an Interstate Sale Voucher,
Go to Gateway of Tally > Accounting Vouchers > F8: Sales
1. Enter the reference in the Ref. field
2. Select Digilink Traders in the Party’s A/c Name field from the List of Ledger Accounts
3. In the Party Details screen, enter the required details
4. Select Interstate Sales @ 2% ledger in the Sales Ledger field from the List of Ledger
Accounts
5. On selecting the Interstate Sales @ 2%, the VAT/Tax Class appears as Interstate Sales @
2% Against Form C

50


6. Select the Name of Item as Air Conditioner from the List of Items
7. Enter the Quantity as 5 and Rate as 28,000. The amount is automatically displayed in the
Amount field.
8. Select Packing Charges from the List of Ledger Accounts and enter the amount as 4,500
9. Select CST @ 2% and the amount is automatically calculated
10. Set the option Is Declared Goods Sales to No
11. Select Form C as Form to Receive
12. The Form number and Date fields will be displayed on selecting the Form to Receive from
the Form Types list
13. Enter the Form number and Date
16. Enter Narration if required

Figure 2.32 Sales Invoice – Sales Against C Form


51


2.3.4 Inter-State Sales at Multiple CST Rates
Example 13:
On 11-4-2011, National Traders sold the following items to Verona Traders vide invoice number
SN03:

Item Description Quantity (in Nos) Rate Amount CST
Gold Jewellery 2 22,500 45,000 1%
Insulators 30 500 15,000 4%
Vacuum Cleaner 2 17,500 35,000 12.5%

Step 1:
i. Inter-State Sales Ledgers
Create the Interstate Sales Ledgers with the following details

Interstate Sales Sales Yes Yes Interstate Sales No
@ 1% Accounts @ 1%
@ 4% Accounts @ 4%
@ 12.5% Accounts @ 12.5%

ii. CST on Sales Ledgers
Create the CST on Sales Ledgers with the following details

Name Under Type of VAT/Tax Inventory Percentage Method of
Group Duty/Tax Class values are of Calcula- Calcula-
affected tion tion
CST @ 1% Duties CST CST @ 1% No 1% On VAT
& Taxes Rate
CST @ 4% Duties CST CST @ 4% No 4% On VAT
& Taxes Rate
CST @ 12.5% Duties CST CST @ 12.5% No 12.5% On VAT
& Taxes Rate

52


Create the sundry debtor ledger – Verona Traders by following the steps given in Example 3.

Step 2:
Let us enter the sales transaction in Tally.ERP 9

1. Enter the reference number in the Ref. field
2. Select Digilink Traders in the Party’s A/c Name field from the List of Ledger Accounts
Amount field
6. In the Accounting Details screen, select Interstate Sales @ 1% from the List of Ledger
Accounts. The VAT/Tax Class will automatically be displayed as Interstate Sales @ 1%
8. In the Accounting Details screen, select Interstate Sales @ 4% from the List of Ledger
Accounts. The VAT/Tax Class will automatically be displayed as Interstate Sales @ 4%
10. In the Accounting Details screen, select Interstate Sales @ 12.5% from the List of Ledger
Accounts. The VAT/Tax Class will automatically be displayed as Interstate Sales @ 12.5%
11. Select the ledgers CST @ 1, CST @ 4%and CST @ 12.5%and the respective values will be
automatically calculated
12. Set Is Declared Goods Sale to No.
13. The field Show Statutory Details to No. Retain the same setting.

53



Figure 2.33 Inter-State Sales at Multiple CST Rates


2.3.5 Inter-state Sales under Sec. 10
As per TN VAT Act, the sales turnover made by a dealer in the course of inter-state trade or
commerce to the government or a registered dealer other than the government, in respect of the
following goods, are required to be reported separately in the box provided in the Form – I.
 Goods intended for re-sale or notified by the Central Government, for use by the dealer in
the manufacture or processing of goods for sale or the telecommunications network or in
mining or in the generation or distribution of electricity or any other form of power
 Containers or other materials intended for use in packing of goods for sale

Example 14:
On 11-4-2011, M/s National Traders sold 8 Nos. of Silk Fabrics to Fortune Agencies, Ahmedabad
for ` 8,000 each vide invoice number SN04.

54


Step 1:
i. Inter-State Sales Ledger for Special Category Goods
Create the inter-state sales ledger for special category goods with the details as given in the
following table:
are affected Returns
Interstate Sales – Sales Yes Yes Inter-State Sales –
Spl Category Accounts Spl. Category Goods

Create the sundry debtor ledger – Fortune Agencies by following the steps given in Example 3.

Step 2:
Let us enter the transaction in Tally.ERP 9
To create an entry for Inter-State Sale of Special Category goods,
2. Select the Party’s A/c Name as Fortune Agencies from the List of Ledger Accounts
4. Select Inter-State Sales – Spl Category ledger in the Sales Ledger field from the List of
Ledger Accounts
5. On selecting the Inter-State Sales – Spl Category, the VAT/Tax Class appears as Inter-State
Sales–Spl. Category Goods from the VAT/Tax Class list
6. Select the Name of Item as Silk Fabrics
Amount field
8. Select CST @ 2% ledger and the amount will be automatically displayed
9. Set the option Is Declared Goods Sales to Yes
10. Set Forms to Receive as Not Applicable

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13. Enter the details in the Narration field, if required

Figure 2.34 Sales Invoice – Sale of Special Category Goods


2.4 Purchase from Un-registered Dealers
Example 15:
On 12-4-2011, M/s National Traders purchased the goods from Gizmo Traders, an unregistered
dealer vide invoice number 05, the details of which are as given below:

Item Description Quantity (in Nos) Rate Amount VAT
Gold Jewellery 2 20,000 40,000 1%
Insulators 5 320 1,600 4%
Vacuum Cleaner 3 15,000 45,000 12.5%
On the same day, M/s National Traders recorded a journal adjustment entry to account for the
input tax credit on purchase from URD.

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Step 1:
Creating Ledgers
i. Ledgers for Purchases From URDs
affected Returns
Purchases Purchase Yes Yes Purchases From No
from URDs @ Accounts URDs – Taxable
1% Goods @ 1%
4% Goods @ 4%
12.5% Goods @ 12.5%

ii. Ledger for Tax Paid on Purchases made from URDs
Name Under Inventory Used in VAT/Tax Class Use for Assessa-
Group values are VAT ble Value Calcula-
affected Returns tion
Tax Paid on Purchase Yes Yes Purchases From No
URD Purchases Accounts URDs – Taxable
@ 1% Goods @ 1%
@ 4% Goods @ 4%
@ 12.5% Goods @ 12.5%

Create the sundry creditor ledger – Gizmo Traders by following the steps given in example 1.

iv. Enabling VAT Adjustments in Journal Voucher Type
To create a VAT Adjustment class for journal vouchers,
Go to Gateway of Tally > Accounts Info. > Voucher Types > Alter > Journal

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1. In the Voucher Type Alteration screen, enter the Name of Class as VAT Adjustment Class

Figure 2.35 Journal Voucher Type – Voucher Class

2. Press Enter to view the Voucher Type Class screen
3. Set Use Class for VAT Adjustments to Yes

Figure 2.36 Voucher Type Class screen

4. Accept the Voucher Type Class screen and return to the Voucher Type Alteration screen

Step 2:
Let us record the transaction in Tally.ERP 9.
i. Purchase voucher for Taxable Goods purchased from URDs
In F12: Purchase Invoice Configuration set Use Common Ledger A/c for Item Allocation to
No
2. Select the Party’s A/c Name as Gizmo Traders from the List of Ledger Accounts

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Amount field.
5. In the Accounting Details screen, select Purchases from URDs @ 1% from the List of
Ledger Accounts. The VAT/Tax Class will automatically be displayed as Purchases From
URDs – Taxable Goods @ 1%
7. In the Accounting Details screen, select Purchases from URDs @ 4% from the List of
URDs – Taxable Goods @ 4%
9. In the Accounting Details screen, select Purchases from URDs @ 12.5% from the List of
URDs – Taxable Goods @ 12.5%
12. Enter the details in the field Narration, if required

Figure 2.37 Purchase Invoice – Purchase from URDs


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ii. Journal Adjustment Entry to Account for Tax on Purchase from URDs
To create a journal adjustment entry to account for tax on purchase from URDs,
Go to Gateway of Tally > Accounting Vouchers > F7: Journal
1. Select Tax on URD Purchase as the VAT Adjustment Class in the Used for field
2. Debit the ledger – Tax Paid on URD Purchases @ 1%. In the VAT Class Details screen, the
VAT/Tax Class will be displayed as Purchase From URDs – Taxable Goods @ 1%
3. Enter the amount as 400 (i.e., 40,000*1% VAT) in the debit field
4. Similarly, debit the ledger – Tax Paid on URD Purchases @ 4%. In the VAT Class Details
screen, the VAT/Tax Class will be displayed as Purchase From URDs – Taxable Goods @ 4
5. Enter the amount as 64 (i.e., 1,600*4% VAT)
6. Debit the ledger – Tax Paid on URD Purchases @ 12.5%. In the VAT Class Details screen,
the VAT/Tax Class will be displayed as Purchase From URDs – Taxable Goods @ 12.5%
7. Enter the amount as 5,625 (i.e., 45,000*12.5% VAT)
8. Credit Output VAT @ 1% ledger.
9. In the VAT Class Details screen, Output VAT @ 1% will be displayed in the VAT/Tax Class
field. Enter the Assessable value as 40,000.
10.Select the required commodity. Any number of Commodities can be selected in the Commod-
ity Name field and assessable value can be specified for each such that the total tax value
matches with the amount debited.
11.Here select the Commodity as Jewellery with Assessable Value of 40,000. Tax amount will
be automatically calculated and displayed.

Figure 2.38 VAT Class Details screen

12.Enter the credit amount as 400
13.Similarly, credit Output VAT @ 4% ledger.
14.In the VAT Class Details screen, Output VAT @ 4% will be displayed in the VAT/Tax Class
15.Select the Commodity as Insulators with Assessable Value of 1,600. The Tax amount will
be automatically calculated and displayed
16.Enter the credit amount as 64
17.Credit Output VAT @ 12.5% ledger.
18.In the VAT Class Details screen, Output VAT @ 12.5% will be displayed in the VAT/Tax
Class field. Enter the Assessable value as 45,000.
19.Select the Commodity as Vacuum Cleaners with Assessable Value of 45,000. The Tax
amount will be automatically calculated and displayed

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20.The credit amount will be automatically displayed
21.Enter the Narration if required

Figure 2.39 Journal Voucher – Tax on URD Purchase


2.5 Exports
Example 16:
On 12-4-2011, M/s National Traders sold the following items to Zeta Inc., New York vide invoice
number SN05.

Item Description Quantity (in Nos) Rate (in ‘$’) Amount (in ‘$’)
Gold Jewellery 3 740 2,220
Vacuum Cleaners 2 530 1,060

The conversion factor per $ is “1 $ = ` 48”
On 13-4-2011, M/s National Traders recorded an adjustment entry to account for refund claimed
on input VAT paid on exported goods.

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Step 1:
Let us create the necessary ledgers to account for export sales.
Creating Ledgers
i. Exports Ledger
Name Under Group Inventory Used in VAT/Tax Class Use for Assessable
values are VAT Value Calculation
affected Returns
Exports Sales Accounts Yes Yes Exports No

ii. Refund on Exports Ledger
Ledger Under Inventory Use for Assessable Used in VAT
values are Value Calculation Returns
affected
Refund on Exports Indirect Incomes No No No

Create the sundry debtor ledger – Zeta Inc. by following the steps given in example 3.

iv. Foreign Currency Creation
In F11: Features > F1: Accounting Features set Allow Multi-Currency to Yes
To create a foreign currency,
Go to Gateway of Tally > Accounts Info. > Currencies > Create

Symbol Formal Number Show Is Symbol Put a SPACE Decimal Places for
Name of Amounts SUFFIXED between Printing Amounts
Decimal in Million to Amount and in Words
Places Amount Symbol
$ US 2 No Yes Yes 2
Dollars

Step 2:
Let us enter the sales transaction and the adjustment entry in Tally.ERP 9.

i. Sales Invoice for Export of Goods
To create the Sales voucher for Export of goods,

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2. Select Zeta Electronics in the Party’s A/c Name field from the List of Ledger Accounts
4. Select the Exports ledger in the Sales Ledger field from the List of Ledger Accounts
5. On selecting the Sales Ledger, the VAT/Tax Class appears as Exports from the VAT/Tax
Class list
7. Enter the Quantity as 5 and Rate as $740. The Forex Rate of Exchange screen will be dis-
played for entering the conversion factor. Enter the details as shown:

Figure 2.40 Forex Rate of Exchange screen

8. The value is automatically displayed in the Amount field.
9. Press Enter key to view the VAT TamilnaduExportINV screen
10. Specify the details as shown:

Figure 2.41 Exports – Input Tax Details sub-screen for Gold Jewellery

11. Similarly, select the stock item Vacuum Cleaners from the List of Items
12. Enter the Quantity as 2 and Rate as $530. Accept the exchange rate as ` 48 per $
13. The value is automatically displayed in the Amount field.

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14. Press Enter key to view the VAT TamilnaduExportINV screen
15. Specify the details as shown:

Figure 2.42 Exports – Input Tax Details sub-screen for Vacuum Cleaners


Figure 2.43 Sales – Exports

18. Accept the sales invoice.

ii. Journal Adjustment Entry to claim the Refund of Input VAT paid on exported goods
To create a journal adjustment entry to account for refund of input tax paid on exported goods,
1. Select Refund Claimed on Zero Rated Sales as the VAT Adjustment Class in the Used for
field
2. Debit the ledger – Refund on Exports and enter 4,350in the debit field

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3. Credit Input VAT @ 1% ledger.
4. In the VAT Class Details screen, the VAT/Tax Class will be displayed as Input VAT @ 1%,
enter the Assessable value as 60,000
5. Enter the amount as 600 (i.e., 60,000*1% VAT)
6. Debit the ledger – Input VAT @ 12.5%. In the VAT Class Details screen, the VAT/Tax Class
will be displayed as Input VAT @ 12.5%, enter the Assessable value as 30,000
7. The amount will be automatically displayed as 3,750 (i.e., 30,000*12.5% VAT)

Figure 2.44 Journal Voucher – Refund Claimed on Zero Rated Sales


2.6 Import
Example 17:
On 14-4-2011, M/s National Traders imported 25 nos of Insulators for $30 each from Glamour
Appliances, New York vide invoice number 06. The conversion factor per $ is “1 $ = ` 45”

Item Description Quantity (in Nos) Rate (in ‘$’) Commodity Code
Fax Machines 10 360 333
Insulators 25 30 2069
On 15-4-2011, an amount of ` 2,500 was paid as entry tax on the goods imported.

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Step 1:
Let us create the necessary ledgers to account for Imports.

Creating Ledgers
i. Imports Ledger
Name Under Group Inventory Used in VAT/Tax Class Use for Assessable
values are VAT Value Calculation
affected Returns
Imports Purchases Yes Yes Imports No
Accounts

ii. Entry Tax Ledger
Ledger Under Inventory values are affected
Entry Tax Current Assets No

Create sundry creditor ledger – Glamour Appliances by following the steps given in example 1.

iv. VAT Commodity Creation
VAT
Sl.
No.
Code Serial Number
1 Fax Machine VAT 333 First Schedule – Part C 32

v. Stock Item – Fax Machines
VAT Details
Name Under Units
Fax Machines Primary Nos Fax Machine 12.5%

Step 2:
Let us enter the transactions in Tally.ERP 9.

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i. Creating a purchase invoice for Import of goods
2. Select Glamour Appliances in the Party’s A/c Name field from the List of Ledger Accounts
4. Select Imports ledger in the Purchase Ledger field from the List of Ledger Accounts
5. On selecting the Imports ledger, the VAT/Tax Class appears as Imports
6. Select the Name of Item as Fax Machines from the List of Items
7. Enter the Quantity as 10 and Rate as $360. The Forex Rate of Exchange screen will be dis-
played for entering the conversion factor. Enter the details as shown:

Figure 2.45 Imports – Forex Rate of Exchange

8. The value is automatically displayed in the Amount field
9. Select the Name of Item as Insulators from the List of Items
10. Enter the Quantity as 25 and Rate as $30. Based on the conversion factor, the value is auto-
matically displayed in the Amount field
12. Enter the details in the Narration field if required

Figure 2.46 Purchase Invoice – Imports

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ii. Creating a Voucher for Payment of Entry Tax
To create an entry for payment of entry tax,
Go to Gateway of Tally > Accounting Vouchers > F5: Payment
1. Select the Bank ledger as Bank of India in the Account field (create a bank ledger with the
name National Bank by using Alt+C key combination)
2. Debit the Entry Tax ledger
3. Enter the amount as 2,500

Figure 2.47 Payment Voucher – Payment of Entry Tax


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2.7 Works Contract and Job Work
Example 18:
On 16-4-2011, M/s National Traders got ` 35,000 worth of graphic designing done from Sunbeam
Designers vide invoice number 011. Deduction amounted to 50% of the job work value. Input VAT
was paid @ 12.5%.

Step 1:
Let us create the necessary ledgers to account for job work.

Creating Ledgers
i. Job work Ledger
Purchase @ Purchases Yes Yes Purchase @ No
12.5% (Job Work) Accounts 12.5% (Job Work)

ii. Input VAT Ledger
Name Under Type of VAT VAT/Tax Class Inventory Percentage Method
Group Duty/ Sub values are of Calcula- of Cal-
Tax Type affected tion culation
Input VAT- Duties VAT Input Input VAT @ No 12.5% On VAT
Job Work & Taxes VAT 12.5% - (Job Rate
Work)

Create the sundry creditor ledger – Sunbeam Designer by following the steps given in example 1.

iv. Stock Item – Graphic Designing
Name Under Units
Graphic Designing Primary Not Applicable

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Step 2:
i. Creating a purchase invoice for Job work
2. Select Universal Traders in the Party’s A/c Name field from the List of Ledger Accounts
4. Select Purchase @ 4% (Job Work) ledger in the Purchase Ledger field from the List of
Ledger Accounts
5. On selecting the Purchase @ 4% (Job Work) ledger, the VAT/Tax Class appears as Pur-
chases @ 4% (Job Work)
6. Select the Name of Item as Graphic Designing from the List of Items
7. Enter the Amount as ` 45,000 and press Enter key to view the Deduction Claimed for Tax
Calculation screen. Enter the Deduction as 50%. The Amount and Taxable Value will be
automatically calculated and displayed

Figure 2.48 Deduction Claimed for Tax Calculation - Job Work

8. Accept the Deduction Claimed for Tax Calculation screen
9. Select the ledger - Input VAT - Job Work. The input VAT amount will be automatically calcu-
lated and displayed
10. The field Show Statutory Details will be set to No which can be enabled to view the break-up
of assessable value, deduction claimed and input VAT

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11.Enter the details in the Narration field if required

Figure 2.49 Purchase Invoice - Job Work

12.Press Y or Enter to accept and save.

Example 19:
On 16-4-2011, M/s National Traders raised a sales invoice in favour of Swasthik Associates for
the contract of Painting & Polishing taken up. Deduction amounted to 50% of the Works contract
value. Output VAT was charged @ 12.5% on the Contract value of ` 60,000.

Step 1:
Let us create the necessary ledgers to account for works contract.
Creating Ledgers
i. Works Contract Ledger
affected Returns
Sales - Works Sales Yes Yes Sales - Works No
Contract @ Accounts Contract @
12.5% 12.5%

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ii. Output VAT Ledger
Name Under Type of VAT VAT/Tax Class Inventory Percent- Method
Group Duty/ Sub values are age of Cal- of Cal-
Tax Type affected culation culation
Output Duties VAT Output Output VAT - No 4% On VAT
VAT @ & VAT Works Contract Rate
12.5%-WC Taxes @ 12.5%

iii. Stock Item – Painting & Polishing
Name Under Units
Painting & Polishing Primary Not Applicable

Step 2:
i. Creating a sales invoice for Works contract
1. Enter the reference number in the Ref field
2. Select Swasthik Associates in the Party’s A/c Name field from the List of Ledger Accounts
4. Select Sales - Works Contract @ 12.5% ledger in the Sales Ledger field from the List of
Ledger Accounts
5. On selecting the Sales - Works Contract @ 12.5% ledger, the VAT/Tax Class appears as
Sales - Works Contract @ 12.5%
6. Select the Name of Item as Painting & Polishing from the List of Items

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7. Enter the Amount as ` 60,000 and press Enter key to view the Deduction Claimed for Tax
Calculation screen. Enter the Deduction as 50%. The Amount and Taxable Value will be
automatically calculated and displayed

Figure 2.50 Deduction Claimed for Tax Calculation - Works Contract

8. Accept the Deduction Claimed for Tax Calculation screen
9. Select the ledger - Output VAT @ 12.5% - WC. The input VAT amount will be automatically
calculated and displayed

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10. Set the field Show Statutory Details to Yes to view the break-up of assessable value, deduc-
tion claimed and input VAT

Figure 2.51 Statutory Details screen - Works Contract

11.Accept the Statutory Details screen

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12.Enter the details in the Narration field if required

Figure 2.52 Purchase Invoice – Job Work


75

Lesson 3: Reversal of Input Tax Credit

Lesson Objectives
On completion of this lesson, you will be able to account for

 Purchase of capital goods
 Purchase of automobiles and air conditioners from non-dealers of auto-
mobiles and air conditioners
 Consignment/branch transfer of goods
 Purchase of Industrial Inputs
 Reversal of Input Tax Credit in journal voucher using VAT Adjustments

In the following cases, the Input Tax Credit is reversed, which is already claimed and availed in
the previous month/ period:
 Capital goods used for civil structures
 Goods used for the purpose of providing facility to the proprietor or partner or director or
employees
 Purchase of Air-conditioner if the dealers are not the regular dealers of Air-conditioner
 Purchase of all automobiles including all vehicles, if the dealers are not dealing in automo-
bile goods
 Purchase of goods for free samples or gifts
 Goods stolen, or lost
 Inputs destroyed due to fire accident or lost in storage
 Goods damaged in transit
 Goods destroyed at the intermediary stage in the process of manufacture
 Sale of Goods in the course of inter-state trade and commerce without Form C
 Transfer of goods to outside the State for sale either by branch or agent without Form-F
(i.e., Consignment Sales or Branch Transfers)
 Purchases Returns

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Reversal of Input Tax Credit

 Purchases for production of Exempted Goods (Finished)
 Input Tax Credit availed for finished goods subsequently exempt
 Unavailed credit on Capital goods (after the 3rd financial year of commencement of com-
mercial production)
 Others, if any

3.1 Goods used for Civil Structures
The value of capital goods purchased during the month, which is used for civil structures. The
Input Tax paid on such capital goods used for civil structures has to be reversed during the same
month.

Example 14:
On 18-4-2011, M/s National Traders purchased Equipment worth ` 1,50,000 taxable @ 4% from
Equipment Agencies vide invoice number 08. On 19-4-2011, M/s National Traders utilised the
machinery purchased for civil structures.
The amount of input tax availed was reversed and transferred to repairs & maintenance account.

Step 1:
Let us create the necessary masters to record the transaction.
i. Equipment Ledger
Create the ledger Equipment with the details as shown in the table:
Ledger Under Inventory Used in VAT VAT/Tax Class
Values are Returns
affected
Equipment Fixed Assets No Yes Purchases – Capital Goods @ 4%

ii. Repairs & Maintenance Ledger
Create the ledger Repairs & Maintenance with the details as shown in the table:
Ledger Under Inventory Values are Use for Assessable
affected Value Calculation
Repairs & Maintenance Indirect Expenses No No

iii. Tax Paid on Capital Goods
Create the ledger Tax Paid on Capital Goods with the details as shown in the table:
Ledger Under Inventory Values are Use for Assessable
affected Value Calculation
Tax Paid on Capital Goods Current Assets No No

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iv. Eligible Input Tax Credit

Name Under Type of VAT VAT/Tax Inventory Percentage Method
Group Duty/ Sub Class values are of Calcula- of Cal-
Eligible Duties VAT Input Purchases – No 4% On VAT
Input Tax & Taxes VAT Capital Rate
Credit Goods @ 4%

v. Sundry Creditor Ledger
Create sundry creditor ledger – Equipment Agencies by following the steps given in example 1.

Step 2:
i. Create a Purchase Voucher for purchase of capital goods
1. Press the toggle key Ctrl+V to select As Voucher
2. Press F12: Purchase Configure and set Allow Expenses/Fixed Assets in Purchase
Vouchers to Yes
4. Credit the ledger Equipment Agencies from the List of Ledger Accounts and enter the
amount as 1,56,000
6. Debit Equipment ledger and VAT/Tax Class appears as Purchases – Capital Goods @ 4%
7. Enter the value as 1,50,000 which is excluding the VAT amount
8. Debit the Tax Paid on Capital goods ledger and enter the 6,000 in the debit field

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Figure 3.1 Purchase Voucher – Capital Goods

ii. Adjustment Entry to Claim Input Tax Credit on Capital Goods
The tax paid on purchase of capital goods can be claimed to the extent of 50% as input tax credit.
In order to claim the eligible Input Tax Credit on tax paid on purchase of Capital goods (i.e, 50%),
a journal adjustment entry needs to be recorded.

To create a journal adjustment entry for claiming the input tax credit on purchase of capital goods,
1. Select VAT Adjustment Class as the Voucher Class
2. Select Input Tax Credit Admitted on Capital Goods in Used for field
3. Debit Eligible Input Tax Credit ledger from the List of Ledger Accounts
4. The VAT/Tax Class appears as Purchase – Capital Goods @ 4%. Enter the Assessable
Value as 1,50,000
5. Enter the debit amount as 3,000 (here only 50% of the actual tax paid on purchase of capital
goods i.e., 6,000*50% is being availed as Input Tax Credit)
6. Credit the Tax Paid on Capital Goods ledger from the List of Ledger Accounts to be credited.
7. The Amount is automatically entered

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Figure 3.2 Journal Voucher – Input Tax Credit Admitted on Capital Goods


iii. Reverse Credit on Goods used for Civil Structures
For reversing the Input Tax Credit already availed on capital goods, pass a journal voucher with
VAT Adjustment Class as shown:
Go to Gateway of Tally > Accounting Vouchers > F7: Journal > Select the Voucher Class -
VAT Adjustment Class
1. Select Reverse Credit – Goods used for Civil Structures as the VAT Adjustment Class in
the Used for field.
2. Debit Repairs & Maintenance ledger and enter the amount as 3,000 in the Debit column
3. Credit Eligible Input Tax Credit ledger
4. In the VAT Class Details screen, Purchases – Capital Goods @ 4% will be displayed in the
VAT/Tax Class field. Enter the Assessable value as 1,50,000.
5. Select the Commodity as Not Applicable and enter the Assessable Value of 1,50,000. The
Tax amount will be automatically calculated and displayed

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6. The credit Amount will be automatically entered

Figure 3.3 Journal Voucher – Reverse Credit – Goods Used for Civil Structures


3.2 Goods used for Consumption
The value of goods may be purchased during the normal course of business for trading purpose
but disposed off other than by way of sale or Goods used for the purpose of providing facility to
the proprietor or partner or director or employees i.e., self-consumption or own use. The Input Tax
paid on goods put to own use has to be reversed during the month.

Example 15:
On 20-4-2011, 1 No. of Gold Jewellery was taken by the director of the organisation for his
personal use. This gold jewellery was purchased from Excel Traders on 1-4-2011 for ` 20,000.
VAT was paid @ 1%.

Step 1:

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i. Expenses on Goods used for Self-Use
Create the ledger Expenses on Goods for Self-Use with the details as shown in the table:
Ledger Under Inventory Values Use for Assessable Used in VAT
are affected Value Calculation Returns
Expenses on Direct No No No
Goods for Self-Use Expenses

Step 2:
Let us enter the transaction in Tally.ERP 9
To create an adjustment entry for reversal of credit availed on goods used for self-consumption,
1. Select Reverse Credit – Goods Utilised for Self-use as the VAT Adjustment Class in the
Used for field
2. Debit the ledger – Expenses on Goods for Self Use and enter the amount as 20,200 (i.e.,
20,000 + 1% VAT)
3. Credit Purchases @ 1% ledger. The Inventory Allocations sub-screen is displayed
4. Select Gold Jewellery in the Name of Item field, enter the Quantity as 1 and Rate as 20,000
5. In the Accounting Details screen the VAT/Tax Class will be displayed as Purchases @ 1%
7. In the VAT Class Details screen, Input VAT @ 1% will be displayed in the VAT/Tax Class
8. Select the Commodity as Jewellery and enter the Assessable Value of 20,000. The Tax
9. The credit amount will be automatically displayed

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The completed journal voucher displays as shown:

Figure 3.4 Journal Voucher – Reverse Credit – Goods Utilised for Self Use


3.3 Purchase – Automobile Spare Parts from Non-Dealer of Automobile
In case of Automobiles, Spare parts & accessories purchased from a non-dealer of Automobiles &
its spare parts the Input Tax paid on such goods has to be reversed during the month.

Example 16:
On 20-4-2011, National Traders purchased 5 Nos. of Automobile spares parts for `1,250 each
from Swasthik Associates, a non-dealer of Automobile spare parts vide invoice number 09. The
goods are subject to 12.5% VAT.

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Step 1:
i. VAT Commodity Creation
VAT
Sl. Used
Name Commodity Code Schedule Number Schedule
No. For
Serial Number
1 Locomotives VAT 324 First Schedule – Part C 23

ii. Stock Item – Automobile Spare Parts
VAT Details
Name Under Units
Automobile Spare Parts Primary Nos Locomotives 12.5%

Step 2:
To create an entry for purchase of automobile spare parts from a non-dealer of automobiles,
2. Select Swasthik Associates in the Party’s A/c Name field from the List of Ledger Accounts
4. Select the Name of Item as Automobile Spare Parts from the List of Items
Amount field
7. Select the ledger Input VAT @ 12.5% and the values will be automatically calculated and dis-
played

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Figure 3.5 Purchase Invoice – Automobile Spare Parts


Step 2: Create Journal Voucher
To create an adjustment entry for reversal of credit availed on purchase of automobile spare parts
from a non-dealer of automobile,
1. Select Reverse Credit – Purchase of Automobiles, Spare Parts as the VAT Adjustment
Class in the Used for field
2. Debit the ledger – Repairs & Maintenance and enter the amount as 1562.50
3. Credit Input VAT @ 12.5% ledger. In the VAT Class Details screen, enter the details as
shown:

Figure 3.6 VAT Class Details screen

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Figure 3.7 Journal Voucher – Reverse Credit – Purchase of Automobiles, Spare Parts


3.4 Purchase of Air Conditioners from Non-Dealer of Air Conditioners
In case where the Air conditioners are purchased from a non-dealer of Air conditioners for the
purpose of trading, the Input Tax paid needs to be reversed.

Example 17:
On 21-4-2011, National Traders purchased 2 Nos.of Air conditioners for ` 25,000 each from
Dewpoint Traders, a non-dealer of Air conditioners vide invoice number 10. The goods are subject
to 12.5% VAT.

Step 1:
Create the Sundry Creditor ledger – Dewpoint Traders by following the steps given in example 1.

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Step 2:
i. Purchase Invoice
To create an entry for purchase of air conditioners from a non-dealer of air conditioners,
2. Select Dewpoint Traders in the Party’s A/c Name field from the List of Ledger Accounts
4. Select the Name of Item as Air Conditioners from the List of Items
Amount field
7. Select the ledger Input VAT @ 12.5% and the values will be automatically calculated and dis-
played
9. Accept the default Bill allocations in the Bill-wise Details screen and enter the Narration if
required

Figure 3.8 Purchase Invoice – Air Conditioners


87


ii. Journal Voucher
To create a journal adjustment entry for reversing the input tax credit,
1. Select Reverse Credit – Purchase of Air Conditioners as the VAT Adjustment Class in the
Used for field
2. Debit the ledger – Repairs & Maintenance and enter the amount as 6,250
3. Credit Input VAT @ 12.5% ledger.
4. In the VAT Class Details screen, enter the details as shown:

Figure 3.9 VAT Class Details

5. The amount will be automatically displayed

Figure 3.10 Journal Voucher – Reverse Credit – Purchase of Air Conditioners


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3.5 Goods Distributed as Free Samples & Gifts
In cases, where the goods are purchased during the normal course of business for trading
purpose but disposed off other than by way of sale i.e., distribution of goods as free sample or
gifts, the Input Tax paid on goods distributed as free samples and gifts has to be reversed during
the month.

Example 18:
On 22-4-2011, 5 Nos. of Insulators were given as free sample to Marvel Traders as promotional
offer. The Insulators was purchased for ` 320 from Excel Traders.

Step 1:
Let us create the required masters to record the transaction

Creating Ledgers
i. Expenses on Free Samples & Gifts
Create the ledger Expenses on Free Samples & Gifts with the details as shown in the table:
Expenses on Free Direct No No No
Samples & Gifts Expenses

Step 2:
To create a journal adjustment entry for reversing the purchase value and input tax credit on
goods given as free samples,
1. Select Reverse Credit – Goods Given as Gift, Free Sample as the VAT Adjustment Class
in the Used for field
2. Debit the ledger – Expenses on Free Samples & Gifts and enter the amount as 1,664 (i.e.,
1,600 + 4% VAT)
4. Select Insulators in the Name of Item field, enter the Quantity as 5 and Rate as 320
8. Select the Commodity as Insulators and enter the Assessable Value of 1,600. The Tax

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Figure 3.11 Journal Voucher – Reverse Credit – Goods Given as Gift, Free Sample


3.6 Goods Lost on Theft, Loss Etc.
Any goods purchased during the normal course of business for trading purpose but if lost by theft,
damaged or lost, the Input Tax paid on the same needs to be reversed during the month.

Example 19:
On 23-4-2011, 5 nos.of G I Pipes were lost in godown of M/s. National Traders. The G I Pipes
were purchased for ` 150 each. The goods were subject to 2% VAT.

Step 1:
Let us create the expense ledger to record the above transaction.

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i. Goods Damaged/Lost
Create the ledger Goods Damaged/ Lost with the details as shown in the table:
Goods Damaged/ Direct No No No
Lost Expenses

Step 2:
To create a journal adjustment entry for reversing the purchase value and input tax credit on
goods lost by theft, loss.
1. Select Reverse Credit – Goods Lost on Theft, Loss Etc. as the VAT Adjustment Class in
the Used for field
2. Debit the ledger – Goods Damaged/Lost and enter the amount as 765 (i.e., 750 + 2% VAT)
4. Select G I Pipes in the Name of Item field, enter the Quantity as 5 and Rate as 150
field. Enter the Assessable value as 750.
8. Select the Commodity as G I Pipes and enter the Assessable Value of 750. The Tax

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Figure 3.12 Journal Voucher – Reverse Credit – Goods Lost on Theft, Loss Etc.


3.7 Inputs Damaged in Transit or Destroyed before Manufacture
Any inputs purchased for use in manufacturing, if damaged during transit (normal or abnormal
loss) before being used in manufacturing, the Input Tax paid on damaged inputs has to be
reversed during the month.

Example 20:
On 23-4-2011, M/s National Traders purchased 100 ltrs of industrial fuel at ` 50/Ltr for its plant
from Sterling Industries vide invoice number 11 and stored the same in its factory godown. On 25-
4-2011, while taking delivery of Industrial fuel from Sterling Industries, it was discovered that 25
ltrs of fuel was lost in transit

Step 1:

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i. Purchases – Inputs @ 4% Ledger
Create the ledger Purchases – Inputs @ 4% with the details as shown in the table:
Ledger Under Inventory Used in VAT/Tax Class Use for Assessable
Values are VAT Value Calculation
affected Returns
Purchases– Purchase Yes Yes Purchases @ 4% No
Inputs @ 4% Accounts (Industrial Input)

ii. Input VAT – Industrial Fuel Ledger

Name Under Type of VAT VAT/Tax Inventory Percentage Method
Group Duty/ sub Class values are of Calcula- of Cal-
ITC–Indus- Duties VAT Input Input VAT @ No 4% On VAT
trial Fuel & Taxes VAT 4% – (Indus- Rate
trial Input)

iii. Loss of Inputs in Transit Ledger
Create the ledger Loss of Inputs in Transit with the details as shown in the table:
Ledger Under Inventory values Use for Assessable Used in VAT
Loss of Inputs in Direct No No No
Transit Expenses

iv. Sundry Creditor Ledger
Create the Sundry Creditor ledger – Sterling Industries by following the steps given in example 1.

v. VAT Commodity Creation
VAT
Sl.
No.
Code Serial Number
1 Industrial Inputs VAT 2067 First Schedule – Part B 67

vi. Stock Item – Industrial Fuel
VAT Details
Name Under Units
Industrial Fuel Primary Lts Industrial Inputs 4%

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Step 2:

i. Purchase Invoice
2. Select Sterling Industries in the Party’s A/c Name field from the List of Ledger Accounts
4. Select the Name of Item as Industrial Fuel from the List of Items
5. Enter the Quantity as 100 lts and Rate as 50/ltr. The value is automatically displayed in the
Amount field
6. In the Accounting Details screen, select Purchases–Inputs @ 4% from the List of Ledger
Accounts. The VAT/Tax Class will automatically be displayed as Purchases @ 4% (Indus-
trial Input)
7. Select the ledger ITC-Industrial Fuel and the values will be automatically calculated and dis-
played

Figure 3.13 Purchases Invoice – Industrial Fuel


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Step 2:
To create a journal voucher for reversing the input tax paid on goods destroyed by fire,
1. Select Reverse Credit – Inputs Damaged in Transit or Destroyed Before Mfg. as the VAT
Adjustment Class in the Used for field
2. Debit the ledger – Loss of Inputs in Transit and enter the amount as 1,300 (1,250 + 4% VAT)
3. Credit Purchases – Inputs @ 4% ledger. The Inventory Allocations sub-screen is displayed
4. Select Industrial Fuel in the Name of Item field, enter the Quantity as 25 and Rate as 50
(Industrial Input)
6. Credit Input VAT – Industrial Fuel ledger.
7. In the VAT Class Details screen, Input VAT @ 4% – (Industrial Input) will be displayed in the
VAT/Tax Class field. Enter the Assessable value as 1,250.
8. Select the Commodity as Industrial Inputs and enter the Assessable Value of 1,250. The

Figure 3.14 Journal Voucher – Reverse Credit – Inputs Damaged in Transit or Destroyed Before Manufacture

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3.8 Loss of Inputs by Fire or Accident
Any industrial inputs purchased for use in manufacturing, if lost by fire or accident, the Input Tax
paid on goods lost by theft has to be reversed during the month.

Example 21:
On 26-4-2011, 10 ltrs of fuel were destroyed due to fire in the godown of M/s National Traders.

Step 1:

i. Loss of Goods by Fire Ledger
Create the ledger Loss of Goods by Fire with the details as shown in the table:
Loss of Goods by Direct No No No
Fire Expenses

ii. Journal Voucher
1. Select Reverse Credit – Inputs Destroyed in Fire or Lost as the VAT Adjustment Class in
the Used for field
2. Debit the ledger – Loss of Goods by Fire and enter the amount as 520 (i.e., 500 + 4% VAT)
3. Credit Purchases – Inputs @ 4% ledger. The Inventory Allocations sub-screen is displayed
4. Select Industrial Fuel in the Name of Item field, enter the Quantity as 10 and Rate as 50
(Industrial Input)
6. Credit ITC-Industrial Fuel ledger.
7. In the VAT Class Details screen, Input VAT @ 4% – (Industrial Input) will be displayed in the
VAT/Tax Class field. Enter the Assessable value as 500.
8. Select the Commodity as Industrial Inputs and enter the Assessable Value of 500. The Tax

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Figure 3.15 Journal Voucher – Reverse Credit – Inputs Destroyed in Fire or Lost

11.Press Y or Enter to accept.

3.9 Unavailed Credit on Capital goods (Time Barred)
The lapsed value of unavailed Input Tax Credit (50% of Input tax paid) on capital goods pur-
chased, after the prescribed period (i.e., three years from the date of commencement of commer-
cial production of capital goods). The value of such input tax credit has to be reversed after 3
years.

The entries to account for the availability of input tax credit and then reversing the same on
account after 3 years are as follows:
i. Accounting the availability of Input Tax Credit
In journal voucher select Input Tax Credit Admitted on Capital Goods in Used for field
Debit: Eligible Input Credit on Capital Goods ledger (with VAT/Tax class Purchase – Capital
Goods @ 4% or 12.5%)
Credit: Tax Paid on Capital Goods ledger (grouped under Current Assets)

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ii. Reversing the Input Tax Credit on non-usage of the same after 3 years
In journal voucher select Reverse Credit – Unavailed Credit on Capital Goods (Time Barred)
as the VAT Adjustment Class in Used for field.
Debit: Expenses ledger (grouped under Indirect Expenses)
Credit: Eligible Input Tax Credit ledger (with VAT/Tax class Purchase – Capital Goods @ 4%
or 12.5%)

3.10 Consignment/Branch Transfers without Form F
The dealer may have a Branch office outside the state and the goods transferred to that branch
may be considered as Branch transfers and not termed as sales. In such case, the bifurcation
needs to be made for the goods sent on principal account (branch transfer) and on Consignment
Basis (transferred to agent). This bifurcation can be identified by selecting the YES or NO option
against the field Is Sales against Principle A/c. This field is set to YES when the transfer is con-
sidered as Branch Transfers and NO in case of consignment transfers.

3.10.1 Consignment Transfers without Form F
Example 22:
On 18-4-2011, M/s National Traders despatched 15 nos of Insulators for ` 320 each as consign-
ment sales to National Enterprises, Mumbai vide invoice number SN07. The goods were
purchased by paying 4% VAT.

Step 1:
The consignment/branch transfer outward ledger can be created under sales accounts by
selecting the VAT/Tax class - Consignment/Branch Transfer Outward. This value will be consid-
ered as a part of total sales.
To create a consignment/branch transfer ledger for showing the value of stock transfers sepa-
rately in profit & loss account without including it in total sales, a user-defined account group
needs to be created. Stock transfer outward and inward have to be grouped under income and
expenses respectively by enabling it for reflecting as part of gross profit in account group master.
i. Stock Transfer Outward Group
Create the account group Stock Transfer Outward with the details as shown in the table:
Group Under Nature Does Group Nett Used Method to
of it behaves Debit/ for Cal- allocate
Group affect like a Sub- Credit culation when used
Gross Ledger Balance in Purch-
Profit for case
Reporting Invoice
Stock Primary Income Yes No No No Not Applica-
Transfer ble
Outward

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The Stock Transfer Outward group appears as shown:

Figure 3.16 Stock Transfer Outward Group

i. Consignment/Branch Transfer Ledger
1. Enter the Name as Consignment/Branch Transfer
2. Select Stock Transfer Outward as the account group in the Under field
4. Set the option Used In VAT Returns to Yes to display the VAT/Tax Class sub-screen.

Figure 3.17 Consignment/Branch Transfer Outward Ledger

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5. Select the VAT/tax class - Consignment/Branch Transfer Outward

Figure 3.18 VAT/Class Selection for Consignment/Branch Transfer Outward

6. Accept the Consignment/Branch Transfer ledger.

ii. Branch Ledger
Create the Branch ledger – National Enterprises grouped under Branch/Division.

Step 2:
Let us enter the sales transaction in Tally.ERP 9
To record the Consignment transfer of goods,
In F12: Sales Invoice Configuration, set Allow Separate Buyer and Consignee Names to No
2. Select National Enterprises in the Party’s A/c Name field from the List of Ledger Accounts
3. Enter the Despatch Details, Buyer’s Details and Consignee details in Party Details screen
4. Select the Consignment/Branch Transfer ledger in the Sales Ledger field from the List of
Ledger Accounts
5. On selecting the Consignment/Branch Transfer, the VAT/Tax Class appears as Consign-
ment / Branch Transfer Outward from the VAT/Tax Class list

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6. Select the Name of Item as Insulators from the List of Items
Amount field
8. Set the option Is Sale in Principal’s A/c to No as the transfer of goods is being considered as
consignment transfer
9. Select the Form to Receive as Form F

Figure 3.19 Sales Invoice – Consignment Transfer Outwards


On selecting any of the Declaration Forms (C, C with E1/E2, F etc.) in
Forms to Receive/Issue, entering the Form series number, Form number and
date, the same will be captured in the printed invoice/voucher.

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3.10.2 Reversal of Input Tax Credit on Consignment Sent without Form F
For the goods when sent on consignment to Agents outside the state for the purpose of trade
without Form ‘F’, the Input tax paid has to be reversed during the month.

Example 23:
On 26-4-2011, on account of non-availability of Form F, the input VAT claimable on the consign-
ment despatched on 18-4-2011 was reversed.

Step 1:
i. Tax Paid on Goods Transferred Ledger
Ledger Under Inventory Use for Assessable Used in VAT
values are Value Calculation Returns
affected
Tax Paid on Goods Direct Expenses No No No
Transferred

Step 2:
1. Select Reverse Credit – Consignment Sales Without Form ‘F’ as the VAT Adjustment
Class in the Used for field
2. Debit the ledger - Tax Paid on Goods Transferred and enter the amount as 192
5. Select the Commodity as Insulators and enter the Assessable Value of 4,800. The Tax

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Figure 3.20 Journal Voucher – Reverse Credit – Consignment Sales Without ‘F’ Form


In case of Consignment Sales made outside the state other than by way of
sales without Form ‘F’, the Input VAT should be reversed to the extent of 4%,
where the goods are purchased at 12.5% VAT. The balance of 8.5% VAT is
available as Input Tax Credit. However, where the Input VAT paid on
purchases made @ 1%, 2%, 4% or any other rate less than 4%, the entire
amount is reversed.

3.10.3 Sales – Branch Transfers
Example 24:
On 22-4-2011, M/s National Traders despatched 20 nos of G I Pipes for ` 150 each to its branch
office – Parijata Enterprises, Karnataka against Form F vide invoice number SN08. The goods
were purchased by paying 2% VAT.

Step 1:
Let us enter the sales transaction in Tally.ERP 9. To record the Branch transfer of goods,

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Ensure that in F12: Voucher Configuration, the option Allow Separate Buyer and Consignee
Names is set to No
2. Select Parijata Traders in the Party’s A/c Name field from the List of Ledger Accounts
3. Select the Consignment/Branch Transfer ledger in the Sales Ledger field from the List of
Ledger Accounts
5. On selecting the Sales Ledger, the VAT/Tax Class appears as Consignment / Branch Trans-
fer Outward from the VAT/Tax Class list
6. Select the Name of Item as G I Pipes from the List of Items
Amount field
8. Set the option Is Sale in Principal’s A/c to Yes as the transfer of goods is being considered as
branch transfer
9. Select the Form to Receive as Form F.

Figure 3.21 Sales – Branch Transfer of Goods


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3.10.4 Reversal of Input Tax Credit for Stock Transferred without Form F
The goods when transferred to the branch office(s) situated outside the state without ‘F’ Form, the
Input Tax paid on such goods has to be reversed during the month.

Example 25:
On 26-4-2011, on account of non-availability of Form F, the input VAT claimable on the stock des-
patched to branch office on 22-4-2011 was reversed.

Step 1:
1. Select Reverse Credit – Stock Transfer Without Form ‘F’ as the VAT Adjustment Class in
the Used for field
2. Debit the ledger – Tax Paid on Goods Transferred and enter the amount as 60
3. Credit Input VAT @ 2% ledger. In the VAT Class Details screen, Input VAT @ 2% will be dis-
played in the VAT/Tax Class field. Enter the Assessable value as 3,000.
4. Select the Commodity as G I Pipes and enter the Assessable Value of 3,000. The Tax
amount will be automatically calculated and displayed.

Figure 3.22 Journal Voucher – Reverse Credit – Stock Transfer Without ‘F’ Form

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In case of Branch Transfers made outside the state other than by way of sales
without ‘F’ Form, the Input VAT should be reversed to the extent of 4%.The
balance of 8.5% VAT is available as Input Tax Credit. However, where the
Input VAT paid on purchases made @ 1%, 2%, 4% or any other rate less than
4%, the entire amount is reversed.

3.11 Purchases for Production of Exempted Goods (Finished)
The value of goods or raw materials purchased and utilised for the manufacture or production of
finished goods, which are exempt as per TN VAT Act (i.e., Goods mentioned in Fourth Schedule),
the Input tax paid on such goods has to be reversed during the month.

The entries to be made are as follows:
Step 1:
Purchase Entry
Debit: Purchase ledger (grouped under Purchase Account with taxable VAT/Tax Classification)
Debit: Input VAT ledger (grouped under Duties & Taxes, Type of Duty as VAT with taxable VAT/
Tax Classification)
Credit: Sundry Creditor ledger

Step 2
Reversing the Input Tax Credit on Goods used for Production of Exempt Goods
In journal voucher select Reverse Credit – Production of Exempted Goods (Finished) as the
VAT Adjustment Class in Used for field.
Debit: Purchase ledger and enter the input VAT amount as per Step 1
Credit: Input VAT ledger used in Step 1 to reverse the input tax amount
The reversal entry will be made to transfer the input VAT amount to purchase value.

3.12 Interstate Sale without 'C form
Sales made in course of interstate trade and commerce to CST registered dealers or any other
person outside the state without ‘C’ Form, the entire amount of Input tax paid on such goods has
to be reversed during the month.

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Example 26:
On 25-4-2011, M/s National Traders sold 2 Nos. of Vacuum Cleaners to Fortune Agencies,
Ahmedabad wihtout selecting ‘C’ Form vide invoice number SN09. CST @ 12.5% was charged.
The Vacuum Cleaners were purchased from Excel Traders for ` 15,000 each by paying VAT @
12.5%. The input tax paid was reversed on 27-4-2011.

Step 1:
Let us record the transactions in Tally.ERP 9.
i. Inter-State Sales
2. Select Fortune Agencies in the Party’s A/c Name field from the List of Ledger Accounts
3. In the Party Details screen, enter the required details
4. Select Interstate Sales @ 12.5% ledger in the Sales Ledger field from the List of Ledger
Accounts
5. On selecting the Interstate Sales @ 12.5% ledger, the VAT/Tax Class appears as Interstate
Sales @ 2% Against Form C
6. Select the Name of Item as Vacuum Cleaners from the List of Items
Amount field.
8. Select CST @ 12.5% and the amount is automatically calculated
9. Set the option Is Declared Goods Sales to No
10. Select Form C as Not Applicable

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Figure 3.23 Sales Invoice – Sales Without C Form

ii. Reversal of Input Tax Paid
CST – Inter-State Sales Ledger
CST on Interstate Direct No No No
Sales Expenses

Journal Voucher
To create a journal voucher for reversing the input tax availed on goods sold during inter-state
sales without Form C,
1. Select Reverse Credit – Interstate Sale Without ‘C’ Form as the VAT Adjustment Class in
the Used for field
2. Debit the ledger – CST on Interstate Sales and enter the amount as 3,750

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3. Credit Input VAT @ 12.5% ledger.
4. In the VAT Class Details screen, Input VAT @ 12.5% will be displayed in the VAT/Tax Class
5. Select the Commodity as Vacuum Cleaners and enter the Assessable Value of 30,000. The

Figure 3.24 Journal Voucher – Reverse Credit – Interstate Sale Without ‘C’ Form


In case of Interstate sales without ‘C’ Form, the entire amount of input tax
paid/payable on purchase of such goods should be reversed.

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3.13 ITC Availed for Finished Goods Subsequently Exempt
The amount of Input tax paid on raw materials which are used for manufacture of finished goods,
which were later exempt, the same has to be reversed to the extent of unused Raw materials for
the applicable period.

The entries to be made are as follows:
Step 1:
Purchase Entry
Debit: Purchase ledger (grouped under Purchase Account with taxable VAT/Tax Classification)
Debit: Input VAT ledger (grouped under Duties & Taxes, Type of Duty as VAT with taxable VAT/
Tax Classification)
Credit: Sundry Creditor ledger

Step 2:
Reversing the Input Tax Credit on Taxable Inputs Purchased for Manufacture of Exempt
Goods
In journal voucher select Reverse Credit – ITC Availed for Finished Goods Subsequently
Exempt as the VAT Adjustment Class in Used for field.
Debit: Purchase ledger and enter the input VAT amount as per Step 1
Credit: Input VAT ledger used in Step 1 to reverse the input tax amount
The reversal entry will be made to transfer the input VAT amount to purchase value.

3.14 Others (specify)
The Input tax paid on goods, reversed on account of any other reason other than as mentioned
above.

110

Lesson 4: Payment of VAT Liability

Lesson Objectives

 Arriving at the tax liability after setting-off input tax credit against tax
payable
 Adjust the Advance Tax and Entry Tax paid against the tax liability
 Payment of VAT and CST Liability

4.1 Advance Tax, Entry Tax and TDS Adjustment Entries
4.1.1 Adjustment Towards Advance Tax or Refund
The advance VAT payments, if any, made by the dealer can be adjusted towards the actual output
tax liability for the return period. For setting off the advance payments with the output tax liability of
current period, a journal entry with VAT Adjustment - Advance Tax Paid needs to be made.

Example 27:
On 15-4-2011, M/s National Traders paid ` 4,500 as advance payment towards VAT. On 30-4-
2011, the advance amount paid was adjusted as follows:
• ` 2,000 against a portion of output VAT
• ` 2,500 against CST dues.

Step 1:
Let us create the Advance Tax ledger to record the above transaction.
i. Advance Tax ledger
Create the ledger Advance Tax with the details as shown in the table:
Ledger Under Inventory Values are Use for Assessable Value
affected Calculation
Advance Tax Current Assets No No

111

Payment of VAT Liability

Step 2:
i. Advance VAT Payment voucher
To create an advance VAT payment voucher,
1. Select the Bank ledger as Bank of India in the Account field
2. Debit the Advance Tax ledger
3. Enter the amount as 4,500

Figure 4.1 Advance VAT Payment Voucher


ii. Journal Entry for Adjusting the Advance Tax Paid towards Output VAT Liability
To create a journal voucher for adjusting advance tax paid towards Output VAT liability,
1. Select the Voucher Class as VAT Adjustment Class
2. Select Advance Tax Paid as the VAT Adjustment in the Used for field.
3. Debit Output VAT @ 4% ledger. In the VAT Class Details screen, the VAT/Tax Class appears
as Output VAT @ 4%. Do not enter the assessable value

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4. Enter the amount as 2,000 in the Debit field
5. Credit the Advance Tax ledger grouped under Current Assets
6. The Credit amount is automatically entered

Figure 4.2 Journal Voucher - Adjustment of Output VAT Towards Advance Tax Paid


Similarly make an entry to set-off a portion of CST amount against the advance tax paid.
2. Select Advance Tax Paid as the VAT Adjustment in the Used for field.
3. Debit CST @ 2% ledger. Select the VAT/Tax Class as Inter-State Sales - Spl. Category
Goods and do not enter the assessable value
4. Enter the amount as 300 in the Debit field
5. Debit the CST @ 1% with VAT/tax class - CST @ 1%. Enter the amount as 450 in the Debit
field
6. Debit the CST @ 4% with VAT/tax class - CST @ 4%. Enter the amount as 600 in the Debit
field
7. Debit the CST @ 12.5% with VAT/tax class - CST @ 12.5%. Enter the amount as 1,150 in the
Debit field

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8. Credit the Advance Tax ledger grouped under Current Assets
10.Enter the details in the field Narration, if required

Figure 4.3 Journal Voucher - Adjustment of CST Towards Advance Tax Paid


4.1.2 Adjustment Towards Entry Tax Paid
Entry tax is levied and collected on the entry of scheduled goods into any local area from outside
the State for consumption, use or sale therein. The importers or dealers of any scheduled goods
liable to pay Entry tax are allowed to reduce their liability under VAT to the extent of Entry tax paid.
The entry tax paid, can be adjusted towards output tax liability in a journal voucher using the VAT
Adjustment – Adjustment Towards Entry Tax Paid.

Example 28:
The entry tax was paid for goods imported on 14-4-2011. On 30-4-2011, M/s National Traders
recorded the adjustment entries to set-off the entry tax paid as follows:
• ` 1,520 against a portion of output VAT
• ` 980 against CST dues.

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Step 1:
i. Journal Entry for Adjusting the Entry Tax Paid towards VAT Liability
Go to Gateway of Tally > Accounting Vouchers > F7: Journal > Select the Voucher Class as
1. Select Adjustment Towards Entry Tax Paid as the VAT Adjustment in the Used for field
2. Debit the Output VAT @ 4% ledger and select Output VAT @ 4% as the VAT/Tax Class from
the VAT/Tax Class list and do not enter the assessable value.
3. Enter the amount as 844.56 in the Debit field
4. Debit the Output VAT @ 2% ledger and select Output VAT @ 2% as the VAT/Tax Class from
the VAT/Tax Class list and do not enter the assessable value
5. Enter the amount as 675.44 in the Debit field
6. Credit the Entry Tax ledger grouped under Current Assets

Figure 4.4 Journal Voucher - Output VAT Adjusted Towards Entry Tax Paid

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ii. Entry to set-off a portion of CST amount against the entry tax paid
2. Select Adjustment Towards Entry Tax Paid as the VAT Adjustment in the Used for field.
3. Debit CST @ 2% ledger. Select the VAT/Tax Class as Inter-State Sales - Spl. Category
Goods
4. Enter the amount as 980 in the Debit field
5. Credit the Entry Tax ledger grouped under Current Assets

Figure 4.5 Journal Voucher - Partial Amount of CST Dues Adjusted Towards Entry Tax Paid


4.1.3 Adjustment Towards TDS
Example 29:
On 19-4-2011, M/s National Traders received ` 50,000 from Pratham Agencies towards advertis-
ing services provided for the month of April 2011. The TDS amount was deducted from the
amount received. On 30-4-2011, the TDS amount was adjusted towards output tax liability.

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Step 1:
Creating Ledgers
i. Tax Deducted at Source
Ledger Under Inventory values are affected
Tax Deducted at Source Current Assets No

Create the Sundry Debtor ledger - Pratham Agencies by following the steps given in Example 3.

Step 2:
i. Receipt Voucher
To create a receipt voucher,
Go to Gateway of Tally > Accounting Vouchers > F6: Receipt
1. Credit Pratham Agencies and enter ` 50,000 in the amount field
2. Debit Tax Deducted at Source ledger and enter the TDS amount as ` 515
3. Debit Bank of India ledger and the amount will be automatically displayed
4. In the Bank Allocations screen, enter the party and bank details

Figure 4.6 Receipt Voucher

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ii. Journal voucher for TDS Adjustment
1. Select TDS Adjustment in Used for field.
2. Debit Output VAT @ 1% ledger. In the VAT Class Details screen, the VAT/Tax class will be
displayed as Output VAT @ 1%. Do not enter the assessable value.
3. Enter ` 515 in the amount field
4. Credit Tax Deducted at Source ledger and the amount will be automatically displayed

Figure 4.7 Journal Voucher - TDS Adjustment


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4.2 Adjustment of ITC against Tax Payable
At the end of every tax period it is advisable to set off the output vat amount of output vat ledgers
with Input VAT amount of input VAT ledgers created.
In case where the net output is in excess, the balance amount of VAT due is transferred to VAT
Payable ledger. In case of for any tax period if input tax is in excess of output VAT, need to adjust
input VAT only to the extent of output VAT liability and balance of ITC can remain in the respective
ledgers.

Example 30:
On 30-4-2011, M/s National Traders recorded an adjustment entry to set-off the input tax credit
against the VAT liability.

Step 1: Creating a VAT Payable Ledger
Create the ledger VAT Payable with the details as shown in the table:
Ledger Under Inventory Values are Use for Assessable Value
affected Calculation
VAT Payable Current Liabilities No No

Step 2:
Let us record the transaction in Tally.ERP 9. To create a journal voucher for adjusting the output
VAT against input VAT,
1. Select Not Applicable from the Voucher Class List
2. Debit Output VAT @ 1% ledger and enter the corresponding ledger balance to nullify the liabil-
ity
3. Similarly, select Output VAT @ 2%
4. Enter the respective ledger balance for each of the output VAT ledgers
5. Credit the Input VAT @ 2% ledger and enter the amount of credit available
6. Credit VAT Payable ledger. The balance amount will be displayed automatically in credit field

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Figure 4.8 Journal Voucher - Entry to set-off the Output VAT dues against Available Input Tax Credit


In case the aggregate of input vat ledgers is less than the debit values of
output VAT values debited, transfer the balance amount to VAT Payable
ledger by selecting it in the credit field. VAT Payable ledger can be grouped
under Duties & Taxes with Type of Duty/Tax as Others or Current Liabili-
ties.

4.3 Adjustment Towards CST Dues
Go to Gateway of Tally > Accounting Vouchers > F7: Journal > Select the Voucher Class as
Select Adjustment Towards CST as the VAT Adjustment in the Used for field
Debit: CST ledger with the applicable VAT/Tax Class
Credit: Input VAT ledgers with the relevant VAT/Tax Class

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4.4 Payment of VAT
Example 31:
On 5-5-2011, M/s National Traders paid ` 599.08 towards VAT dues.

Let us record the transaction in Tally.ERP 9. To create a CST payment voucher,

Scenario 1: Recording Payment Entry using VAT Payment Button
In the F12: Payment Configuration screen, set Use Single Entry mode for Pymt/Rcpt/Contra
to No
1. In the Payment voucher screen, click the VAT Payment button or press Alt + V to display the
VAT Payment Details sub-screen
2. In the Period From field, enter the dates as 1-4-2011 to 30-4-2011, as the period for which
payment is being made
3. Select VAT as the type of payment in the Payment Towards field
4. Select Type of Payment as Not Applicable
5. Enter the date as 5-5-2011 in Deposit Date field
6. Enter the Name of Bank & Branch (remittance) as Bank of India, Branch code (remit-
tance) as 03252 and Instrument No. as 051230

Figure 4.9 VAT Payment Details

7. Accept the VAT Payment Details screen and the Payment voucher screen will be displayed.
8. Debit the ledger VAT Payable and enter 599.08 in the amount field
9. Credit National Bank ledger and amount will be displayed automatically

121



Figure 4.10 VAT Payment Voucher


Scenario 2: Recording Payment Entry using Stat Payment button
In Payment Voucher, the S: Stat Payment button is introduced to automatically offset the output
VAT dues against available tax credit and arrive at the payable value. The calculation will be
automated only if the VAT ledgers are predefined with VAT Sub Type as Input VAT and Output
VAT in ledger master. On using Stat Payment button, the option Provide Details gets displayed in
Payment Voucher to enter the VAT Payment Details. The options in VAT Payment Details differ
from one State to another depending on the State-specific Return Form requirements.

122


Setup:
In the F12: Payment Configuration screen, set Use Single Entry mode for Pymt/Rcpt/Contra
to Yes
In the Payment voucher screen,
1. Select the Bank ledger in Account field.
2. Click the Stat Payment button or press Alt + S to display the VAT Statutory Payment sub-
screen.

Figure 4.11 VAT Payment - Statutory Payment

3. In Statutory Payment sub-screen, provide the details given below:
 Type of Duty/Tax: Select VAT as the payment is being made towards VAT dues.
 Auto Fill Statutory Payment: Set it to Yes to automate display of VAT payable amount.
 Adjust Input VAT for Payment: This field gets displayed only when - Auto Fill Statutory
Payment is enabled. On setting this field to Yes, the VAT payable amount gets calculated
by offsetting output VAT against the available tax credit.
 Period From: Enter the return period in From and To fields.

Figure 4.12 Statutory Payment

123


In case of VAT ledgers created in companies using versions lower than
Tally.ERP 9 Release 2.0, all the input and output VAT ledgers will be prede-
fiend with VAT sub Type as per the VAT/Tax class selected. However, to use
the Statutory Payment facility these ledgers have to be re-accepted.
In absence of taxable sales entries or output VAT ledgers, if the option - Auto
Fill Statutory payment is enabled, the Alert Message - No VAT Ledger
Exists for Adjustment will be displayed.
The output VAT due is calculated and displayed in payment voucher on:
 Paying only the output VAT amount using Statutory Payment button by
setting Auto Fill Statutory Payment to Yes and Adjust Input VAT for
Payment to No
Setting options - Auto Fill Statutory Payment and Adjust Input VAT for
Payment to Yes when there is balance amount remaining after offsetting
tax credit.

 In the Payment Voucher, the output and Input VAT amount will be automatically set-off and
the VAT payable amount gets calculated displayed. On using Stat Payment button, the Pro-
vide Details option is displayed.
 Set Provide Details to Yes and enter the bank details.

Figure 4.13 Payment Vouchyer using Stat Payment

124


 In the VAT Payment Details screen, enter the details as shown:

Figure 4.14 VAT Payment sub-screen

 Accept the VAT Payment Details screen and payment entry.

4.5 Payment of CST
Central Sales Tax is payable in the state from which goods are sold. The tax so collected is
retained by the state in which it is collected. The State Government Sales Tax Officer who
assesses and collects local state sales tax also assesses and collects Central Sales Tax.
The due date is same as for the period to submit returns under Value Added Tax (VAT) of the
appropriate state. The CST payable amount should be rounded off to the nearest rupee.

Example 32:
On 5-5-2011, M/s National Traders paid ` 10,490 as CST dues.

Step 1:
Let us record the transaction in Tally.ERP 9. To create a CST payment voucher,
1. Select the Bank ledger in the Account field
2. Click the VAT Payment button or press Alt + S to display the Statutory Payment sub-screen
3. In Statutory Payment sub-screen, provide the details given below:
 Type of Duty/Tax: Select CST as the payment is being made towards VAT dues.
 Auto Fill Statutory Payment: Set it to No as the CST paid on purchases cannot be set-off
against CST on sales.

Figure 4.15 Statutory Payment - CST

125


4. In the Payment Voucher, Set Provide Details to Yes to display the VAT Payment Details sub-
screen
5. In the VAT Payment Details screen, enter the details as shown:

Figure 4.16 CST Payment Details

6. Accept the VAT Payment Details screen and the Payment voucher screen will be displayed.
7. Debit the ledger CST @ 2% and CST @12.5%. Enter the corresponding ledger balances for
each ledger.

Figure 4.17 CST payment Voucher


126

Lesson 5: VAT Reports

Lesson Objectives

 Generate VAT Computation Report
 VAT Statutory Monthly and Annual Return Form
 Form W for Exporters
 VAT Annexures
 VAT Commodity Report
 VAT Registers

The VAT system is based on self-assessment and transparency at every stage of transaction.
Hence, accurate record maintenance is of critical importance.
In Tally.ERP 9, you can generate statutory returns as prescribed in the statues. In this lesson, we
will discuss about the books of accounts, reports and registers that assists you in managing your
business and compliance with VAT.

5.1 VAT Computation Report
To view the VAT Computation Report,
Go to Gateway of Tally > Display > Statutory Reports > VAT > VAT Computation
The VAT Computation reports provide the Assessable Value and the Tax Amount of the sales and
purchase transactions entered using different VAT/ Tax classifications.

127

VAT Reports

The VAT Computation report displays as shown:

Figure 5.1 VAT Computation Report

The above screen displays the total of VAT payable on sales and input tax credit available on
purchases made during the specified period.
The essence of VAT is the offsetting of Input VAT against Output VAT. The VAT computation report
shown above precisely indicates the value of VAT Payable after offsetting the input VAT against
the output VAT along with CST liability if any.

Assessable Value
The Assessable Value is the sum of total value of goods at which they are purchased and sold.
This assessable value is the value on which VAT is calculated.

Tax Amount
The total Tax Amount calculated on Assessable value using the respective Tax percentage is the
Tax Amount.

128

VAT Reports

Show All VAT Classifications
From the VAT Computation screen, click on F12: Configure and set Show All VAT Classifica-
tions to Yes.

Figure 5.2 VAT Computation Configuration – VAT Classifications

The VAT Computation screen displays as shown:

Figure 5.3 VAT Computation – Break-up of All VAT Classifications

129

VAT Reports

Figure 5.4 VAT Computation – Break-up of All VAT Classifications

130

VAT Reports

Click on Alt+F1: Detailed button to view the detailed VAT Computation report. A part of the
detailed report displays as shown:

Figure 5.5 VAT Computation – Detailed

The report also provides drill down facility for each VAT classification listed in the report. To drill
down, select the required classification and press Enter.

VAT Classification Vouchers
To view the VAT Classification vouchers, select any one the VAT Classifications from the VAT
Computation report and press Enter.

131

VAT Reports

The VAT Classification Vouchers report is displayed as shown:

Figure 5.6 VAT Classification Vouchers screen

VAT Analysis
The VAT Analysis section is introduced in the VAT Computation report to provide information on
VAT Payable, amount paid and refund amount for the current period along with the details of input
tax credit and VAT liability carried forward to the next return period.
To view the VAT analysis press F12: Configure in VAT Computation screen and set Show VAT
Analysis to Yes.
Press F1: Detailed button (Alt+F1) to view the breakup of VAT Liability and VAT Payments.

132

VAT Reports

VAT Computation screen with VAT Analysis is displayed as shown.

Figure 5.7 VAT Computation with VAT Analysis

In the VAT Analysis displayed above, the VAT liability includes CST dues.
VAT Payable = CST (7,600 + 2890) + VAT (6550.34) = 17,040.34

133

VAT Reports

5.2 VAT Commodity Report
In the VAT Commodity report, the commodity-wise break-up of assessable value and tax amount
of stock items invoiced using the respective VAT/Tax classification will be displayed.
Go to Gateway of Tally > Display > Statutory Reports > VAT > VAT Commodity

Commodity-wise Purchase
Select Purchases from VAT Commodity menu and press Enter key to view the Commodity-wise
Purchase report as shown:

Figure 5.8 VAT Commodity Report - Purchase

134

VAT Reports

Commodity-wise Sales
Select Sales from VAT Commodity menu and press Enter key to view the Commodity-wise
Sales report as shown:

Figure 5.9 VAT Commodity Report - Sales

5.3 VAT Registers
VAT Purchase Register
The VAT Purchase Register provides complete details of all the purchases made in a particular
tax period. This register captures the invoice-wise purchases with voucher number, VAT registra-
tion number, stock items invoiced, invoice value, assessable value, apportioned additional
expenses, VAT/Tax classifications and tax amount.
To view the VAT Purchase Register,
Go to Gateway of Tally > Display > Statutory Reports > VAT > VAT Register > VAT Purchase
By default, the fields - Show Voucher Number, Show Quantity Details and Show Additional Cost
will be set to Yes. To view the supplier invoice number, CST number, rate and item value click on
F12: Configure. Set the options as shown below:

Figure 5.10 Purchase Register Configuration

135

VAT Reports

The options shown in the Configuration screen are:
 Show Voucher Number: This field will be set to Yes to display the voucher number.
 Show Supplier Invoice No. & Date: Set it to Yes to display the Supplier Invoice No. and
date entered in the purchase invoice.
 Show CST No.: Set it to Yes to capture the CST number entered in the party ledger master
or the party details screen.
 Show Quantity Details: This field will be set to Yes to display the quantity purchased.
 Show Rate Details: Set it to Yes to display the rate at which the stock items were pur-
chased.
 Show Item Value: Set it to Yes to display the assessable value of stock item purchased.
 Show Additional Cost: This field will be set to Yes to display the value entered while
invoicing for additional expense or income ledger enabled for apportionment.
In the VAT Purchase Register screen, press F1: Detailed button (Alt+F1) to display the inventory
details and VAT/Tax classifications. The VAT Purchase Register displays as shown:

Figure 5.11 VAT Purchase Register - Screen 1

136

VAT Reports

Scroll horizontally to view the columnar details.

Figure 5.12 VAT Purchase Register - Screen 2

VAT Sales Register
The VAT Sales Register provides complete details of all the Sales made in a particular tax period.
This register captures the invoice-wise Sales with voucher number, VAT registration number,
stock items invoiced, invoice value, assessable value, apportioned additional incomes, VAT/Tax
classifications, tax amount and additional tax/Cess/Surcharge if any depending on the state
selected for VAT compliance.
To view the VAT Sales Register,
Go to Gateway of Tally > Display > Statutory Reports > VAT > VAT Register > Vat Sales
Press F12: Configure. By default, the fields - Show Voucher Number and Show Quantity
Details will be set to Yes. To view the Voucher Reference number, CST number, rate and item
value set the options as shown below:

Figure 5.13 Sales Register - Configuration

137

VAT Reports

The options shown in the Configuration screen are:
Show Voucher Number: This field will be set to Yes to display the voucher number.
Show Voucher Ref: Set it to Yes to display the voucher reference number entered in Ref field of
sales/tax invoice.
Show CST No.: Set it to Yes to capture the CST number entered in the party ledger master or the
party details screen.
Show Quantity Details: This field will be set to Yes to display the quantity sold.
Show Rate Details: Set it to Yes to display the rate at which the stock items were sold.
Show Item Value: Set it to Yes to display the assessable value of stock item sold.
In the VAT Sales Register screen, press F1: Detailed button (Alt+F1) to display the inventory
details and VAT/Tax classifications. The VAT Sales Register displays as shown:

Figure 5.14 VAT Sales Register - Screen 1

138

VAT Reports

Scroll horizontally to view the columnar details.

Figure 5.15 VAT Sales Register - Screen 2

5.4 Statutory Returns and Annexures
5.4.1 VAT Return Form I
Go to Gateway of Tally > Display > Statutory Reports > VAT > VAT Forms > VAT Return
Forms > Form I
Press S: Select Printer button (Alt+S), select the required printer and set the Paper Type as A4.
Every Dealer who is liable to pay tax under TN VAT, other than dealers who have opted for
payment of tax at compounded rates, including agents / branch are required to file a monthly
return in Form I and Annual Return in Form I-1. The Refund application form for exporters - Form
W has to be sumbitted by the exporters.
The monthly returns are required to filed on or before 20th of the succeeding month to the
assessing authority. Along with the monthly returns, details of purchases and sales are required to
be submitted in Annexures I, II, III & IV.

139

VAT Reports

The Monthly VAT Returns in Form I for M/s. National Traders displays as shown:

Figure 5.16 VAT Monthly Return in Form I Page 1

140

VAT Reports

Figure 5.17 VAT Monthly Return in Form I page 2

141

VAT Reports

5.4.2 VAT Return Form I-1
Forms > Form I-1
The Annual Return in Form I-1 for M/s. National Traders displays as shown:

Figure 5.18 Form I-1

142

VAT Reports

5.4.3 Form W
Forms > Form W
The Refund Application Form for Exporters in Form W for M/s. National Traders displays as
shown:

Figure 5.19 Form W - Page 1

143

VAT Reports




5.4.4 VAT Annexures
As discussed earlier, the details of purchases, sales and transfers in/out are required to be
enclosed in the respective annexures to the monthly Return. There are basically four annexures,
which are prescribed in the TN VAT Act.

Monthly Annexures – Annexure I
Annexure I contains the details of purchases, Imports and Branch transfer inwards made during
the given month.
Go to Go to Gateway of Tally > Display > Statutory Reports > VAT > VAT Forms > VAT
Annexures - Monthly > Annexure – I

144

VAT Reports

The Annexure I of M/s. National Traders displays as shown:

Figure 5.23 Annexure I

Monthly Annexures – Annexure II
Annexure II contains the details of Sales, zero rated sales, exempt goods and Branch transfer
Outwards made during the given month.
Go to Gateway of Tally > Display > Statutory Reports > VAT > VAT Forms > VAT Annexures -
Monthly > Annexure – II

145

VAT Reports

In the Print Report screen set the option - Show Inter-state sales to Yes.

Figure 5.24 Annexure II - Print Report

The Annexure II of M/s. National Traders displays as shown:

Figure 5.25 Annexure II

146

VAT Reports

Monthly Annexures – Annexure III
Annexure III contains the details of reversal of Input Tax Credit already claimed or availed.
Monthly > Annexure – III
Enter the details in the Print Report screen as shown:

Figure 5.26 Print Report screen

147

VAT Reports

The Annexure III of M/s. National Traders displays as shown:

Figure 5.27 Annexure III

The various transactions relating to reversal of Input Tax Credit are discussed
in detail in Lesson 3 – Reversal of Input Tax Credit.

148

VAT Reports

Monthly Annexures – Annexure IV
Annexure IV contains the details of zero rated sales and other export information during the given
month.
Monthly > Annexure – IV
The Annexure IV of M/s. National Traders displays as shown:

Figure 5.28 Annexure IV – Zero Rated Sales Details

Figure 5.29 Annexure IV – Export Details

Similarly generate annuxures of Annual Return by navigating to Gateway of Tally > Statutory
Reports > VAT > VAT Forms > VAT Annexures - Annual

149

VAT Reports

Annual Annexures – Annexure I
Go to Gateway of Tally > Statutory Reports > VAT > VAT Forms > VAT Annexures - Annual >
Annexure I
The Annexure I of M/s. National Traders displays as shown:

Figure 5.30 Annual Annexures - Annexure I

150

VAT Reports

Annual Annexures – Annexure II
Annexure II
In the Print Report screen set the option - Show Inter-state sales to Yes.

Figure 5.31 Annual Annexure II - Print Report

The Annexure II of M/s. National Traders displays as shown:

Figure 5.32 Annual Annexures - Annexure II

151

VAT Reports

Annual Annexures – Annexure III
Annexure III
The Annexure III of M/s. National Traders displays as shown:

Figure 5.33 Annual Annexures - Annexure III

Figure 5.34 Annual Annexures - Annexure III

152

Lesson 6: E–VAT

Lesson Objectives

 Export the Annexures I, II, III and IV in Text as well as Excel Spread-
sheet format.
 Understand the procedure of validating and data exported to excel files
 Understand the procedure of uploading the validated excel sheets to the
website.

6.1 Online Filing
In the official website of Tamil Nadu, the Dealers need to login with their user name, i.e., TIN and
the respective password allotted to them by the department. The annexures can be filed online for
the required period by clicking on the Monthly Returns tab and submitting the required details for
filing annexure – I, II, III and IV.
A proforma of Annexures is made available to the dealer. The dealer has to take a printout of the
filled in Annexure I, II, III and IV from Tally.ERP 9. The values can also be filled manually in the
respective columns of the proforma annexures and uploaded online to the department.

6.2 Uploading in Excel Format
The dealer needs to upload the Excel file in the format as prescribed by the department. The
excel files in the prescribed format can be generated directly from Tally.ERP 9 and uploaded to
the department website. While filing the VAT Form I the dealer can upload the Annexures in Excel
Spreadsheet format to the Tamil Nadu VAT official site www.tnvat.gov.in.

Exporting the Data from Tally.ERP 9 for E-Filing
The E-VAT feature provided in Tally.ERP 9 facilitates the e-filing of Annexures in the excel spread-
sheet format.

153

E-VAT

For dealers' convenience, the facility is provided to generate:
 A single excel file with all worksheets for Annexure I, Annexure II, Annexure III, Annexure
IV Export and Annexure IV Import
 Separate Excel files for Annexure I, Annexure II, Annexure III, Annexure IV Export and
Annexure IV Import
Using the options - Annexure-I, Annexure-II, Annexure-III, Annexure-IV Import and
Annexure-V Export, separate excel files can be generated for each of the annexures.
On selecting e-VAT Annexures option, a single excel sheet can be generated with separate
worksheets for Annexure I, Annexure II, Annexure III, Annexure IV Export and Annexure IV
Import.
To view the E-VAT menu for filing e-returns from Tally.ERP 9,
Go to Gateway of Tally > Display > Statutory Reports > VAT Reports > Select e-VAT
Annexures
In the Print Report screen, press Backspace key to make necessary changes.
 Language: Default (All Languages) appears by default and is not editable.
 Format: Excel (Spreadsheet) appears by default and is not editable.
 Export Location: The location of Tally.ERP 9 installed folder will be displayed in the here.
The export location can be changed as per requirement.
 Output File Name: The Excel file should have the naming pattern as eleven digits TIN
Number followed by Return month and year in mmyyyy format. The VAT TIN (Regular)
as entered in F11: Features > F3: Statutory & Taxation is captured in the Output File
Name field and the month and year is captured from Print Report screen.
 Excel (spreadsheet) Formatting: set to Yes, to export the report with all relevant format-
ting.
 with Colour: set to Yes, to export the report with background colour for the header.
 Enter the Return period in the From and To fields.
 Set Show Inter-state sales in Annexure -II to Yes.

Figure 6.1 E-VAT Annexure – Print Report screen

 Press Enter to export the details. The file will be saved in Microsoft Excel format.

154

E-VAT

The exported file will be saved in Tally.ERP 9 folder by default. However, you can save the file in
any other folder as per your requirements, by specifying the path in the Output File Name field.
The Excel spreadsheet appears as shown:

Figure 6.2 Excel File Containing Exported Details

Instructions to be Followed for Validating the Information in the Exported Excel Sheets
1. Do not Change the Output File Name. (The file Name should have the naming pattern as
eleven digit TIN Number followed by Return month and year as (mmyyyy). Example: If the TIN
number is 11201317891 and Return month is March 2011, then the Excel File sheet should be
named as 11201317891032011.xls
2. The Output Sheet Name fields in the excel File must be as stated below:
 Sheet1 – Annex_I

 Sheet2 – Annex_II

 Sheet3 – Annex_III

 Sheet4 – Annex_IV_ export

 Sheet5 – Annex_IV_ import

3. The cells in the Annexure should contain text without any spelling mistakes.
4. Column A1 is Mandatory. Columns D1, E1, F1, G1, and H1 are to be Numeric.
5. The in-between blank rows / Columns to be avoided.

155

E-VAT

Procedure for Uploading the Validated Excel Sheets
The dealers need to login to the website with their user name (TIN number) and the respective
password given to them by the department and submit the details.
In the website:
 Click on Form–I annexure Upload link to view the option to Upload Form I Annexures in
Excel Format
 Click on Browse and select the exported excel file from Tally.ERP 9 folder
 Click on Upload for e-filing of annexures.

156

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