Recently, a reader who is about to start an online business asked me this question... At that moment I didn't know the answer, so today that I visited my Chartered Accountant decided to clarify this (also because I'm thinking of a new venture on these lines).
A company is only required to register for VAT if its turnover for sales of goods is above Rs. 5 lakhs (Rs. 500,000). Thus, while your turnover is below that, you need not register for it, nor charge your customers for this.
Certainly, you can register for it even before if you want to. It will cost about 20 to 30,000 Rupees, and eventually you will recover this money from the government at the end of the Financial Year as a settlement when you file your income returns.
If you are starting your business, my advice is that you wait and only when you see things are moving on well and you are getting close to Rs. 5 lakhs turnover, then approach your C.A. for VAT registration. Surely your clients will appreciate it.
Note that Sales tax and VAT are one and the same thing.
But VAT is separate from Service tax. Even if your company's turnover for services is above 10 lakhs and you are registered for Service tax, this is completely independent and does not affect VAT.
According to my CA they will unite these two in the future into one (called Goods and Sales Tax, GST), with benefits for tax deductions... But this may not happen until 2012 or 2013.
A company is only required to register for VAT if its turnover for sales of goods is above Rs. 5 lakhs (Rs. 500,000). Thus, while your turnover is below that, you need not register for it, nor charge your customers for this.
Certainly, you can register for it even before if you want to. It will cost about 20 to 30,000 Rupees, and eventually you will recover this money from the government at the end of the Financial Year as a settlement when you file your income returns.
If you are starting your business, my advice is that you wait and only when you see things are moving on well and you are getting close to Rs. 5 lakhs turnover, then approach your C.A. for VAT registration. Surely your clients will appreciate it.
Note that Sales tax and VAT are one and the same thing.
But VAT is separate from Service tax. Even if your company's turnover for services is above 10 lakhs and you are registered for Service tax, this is completely independent and does not affect VAT.
According to my CA they will unite these two in the future into one (called Goods and Sales Tax, GST), with benefits for tax deductions... But this may not happen until 2012 or 2013.
If my turnover is more than 5 lakhs on non vat applicable goods and less then 1 lakhs on vat applicable good, do i need to charge vat.
ReplyDeletethanks, after a day's search I finally got the answer I was looking for.
ReplyDeleteHey Ram,
ReplyDeleteI'm glad to know this has helped you!
Javier
on a similar context i wanted to resolve a doubt,i am soon going to start an online service firm efficient in providing services online.starting off with a turnover of about 50000rs what procedures should be adopted in setting up the firm,please also mention the compulsory legal procedures.
ReplyDeleteHello there,
DeleteI don't know why I hadn't seen your comment earlier... really sorry for the delay.
In case you still need that info, maybe you would like to follow this link: http://mumbaientrepreneur.blogspot.in/2008/11/legal-process-to-start-company.html
or
http://mumbaientrepreneur.blogspot.in/2008/11/last-friday-after-posting-on-blog-i-had.html
If you need more information, let me know.
Javier
Hi Javier,
ReplyDeleteIf you have any knowledge on App developers, who want to sell their apps on the app stores (apple, goolge etc)
How can I start with, Currently its only me, with couple of apps, that I am still working on.
If they start selling good on the app stores, which will make me to expand as app developer firm, How can I register the start-up firm, to be recognized as a corporate in Apple store, Google Play store etc.
So put guide to achieve my goals.