Rate Difference in VAT

Sometimes it might happen that subsequent to a sale or purchase, the rate per unit of item is revised. In this case, rate difference allowed on purchase or sales are also entered through Debit Note and Credit Note, thus, reducing the purchase and sales value, respectively.

Debit note to supplier

For example your supplier reduces price due to competition and allowed a rate reduction of Rs. 100/each on 5 units of a good supplied to you and issued a credit note for Rs. 520(Rs.100 x 5 + 4% of Rs. 500). Then you pass an entry in Debit note by selecting the name of items and entering the rate difference (Rs.500 in this case) in the amount column and after entering item details, in the next row, press enter and select Input VAT @ 4%.

In the same way you can pass entry in Credit note in case you

VAT in Purchase Return and Sales Return(Debit Note/Credit Note

For passing Purchase return in Tally, Debit note is used and for Sales return, credit note is used. Rate difference allowed by vendor is entered in debit note and when granted to buyer is entered in credit note. Net sales or purchases are taken into consideration for VAT computation.

Sales Return
For example Mr. Rajiv Ghosh returned two monitors worth Rs. 10000/- due to some defects on which VAT @ 4% is charged. Therefore the total value comes to Rs 10400/-( Rs. 10000 + 4% of Rs. 10000)
In this case, select sales @ 4% ledger in the Sales Ledger field in the credit note voucher type. In the item field, give details of item returned worth Rs. 10000. After the items enter, press enter to move the additional aentry area, where you have to select Output VAT@4%, Press Ctrl + A to save the entry.

Purchase Return
For example some goods are returned to supplier due to defects, that are subject to 4% VAT.
In this case, at Debit note field , at purchase ledger field, select Purchase 4% ledger and at item field, enter the details of items, which is to be returned. In the next row press enter to move to the additional accounting entries where you have to select Input VAT @4% from the list of ledger to automatically compute the amount of VAT. Then Press Ctrl + A to save entry.

More than one VAT Rate Invoice entry

Different goods have different VAT rates(say 4% & 12.5%), and its quiet possible that a trader deals in more than one type of good. In this case the purchase invoice entry can be passed in the following way:

• Create Purchase @ 4% Account, Purchase @ 12.5% Account. It should be under Purchase account with VAT rate applicable like Purchase @ 4%, Purchase @ 12.5%.
• Create Input VAT @ 4% Account and Input VAT @ 12.5% Account under Duties and Taxes and select VAT under Type of Duties/taxes and Input VAT @ 4% and Input VAT @ 12.5% under default Tax and VAT class.
• Create suppliers account under sundry creditors if not created.
• Press F12 -> Invoice configuration -> set no at Use common ledger account and no at Allow selection of VAT/Tax class during voucher entry.
• Give item details at the entry at accounting allocation, select purchase-exempted ledger. Then enter item details for each item, select respective Purchase ledger and select the VAT class for each item.
• After completing the item details, select the input VAT A/c for each rate one by one, to get VAT computed on VAT-able items.
  

Sales entry with single VAT rate.

Press F12 -> select Invoice/orders entry configuration -> press enter -> set yes at the option 'Use common ledger for item allocation?' -> press enter.
At Sales @ 4% A/c, select the sales ledger with VAT rate applicable like sales @4%.
Go to Accounting Vouchers from Gateway of Tally and press F8 for sales. There select Sales @ 4% under sales ledger and select sales @ 4% under VAT/TAX class. Enter the item details there. Then after that press enter and select VAT ledger, for example output VAT @ 12%, from the list and provide the rate to be charged. Press Ctrl + A to save the enty.

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.