Ledgers to be created for VAT

Create another Sales, Purchase and VAT ledger and enable 'use as VAT return' as yes.
Purchase and Sales Ledger
Then create purchase and sales ledger for each VAT rates, for example Sales @ 4%, purchase @ 4%, sales @ 12%, purchase @ 12%,etc. You can provide any other suitable name too but do set 'yes' at 'Used in VAT return?' to link the ledger to VAT computation and VAT return.
At VAT/Tax class field, select the applicable VAT classification, which would be selected as default on entry of the sales/purchase ledger.VAT Ledger
In the same way create input and output VAT ledger, for example Output VAT @ 4%, Input VAT @ 4%,Output VAT @ 12%, Input VAT @ 12% etc.

Activation of VAT

For Activating VAT(Value Added Tax) :
Press F11 -> Press F3 -> Set 'enable value added tax(VAT)' as 'yes' -> Enable 'Set/alter VAT details' option as 'yes' -> Enter VAT TIN number and PAN number there -> press enter and save it.













Then come back to Gateway of Tally and press F12 then select Invoice/Orders Entry and press enter. Set 'Allow selection of VAT/Tax class during entry' and 'Warn on Mismatch in VAT Rates' as 'yes'. Then save it.