Rate of Tax:
The tax rate is not uniform. Various rates are applicable to various goods. The following are the rate of tax under the Tamil Nadu Value Added Tax Act, 2006 ('Act' for short) for the goods specified in the respective schedules:
Ø Goods which are taxable at the rate of 1% - First Schedule - Part A - Jewellery goods;
Ø Goods which are taxable at the rate of 4% - First Schedule - Part B - 150 goods are placed in this part;
Ø Goods which are taxable at the rate of 12.5% - First Schedule - Part C - All goods other than those exempted in the fourth schedule and those specified in Second Schedule and in Part A and Part B of the First Schedule;
Ø Various rates of tax - Second Schedule - levied at the point first sale in the State or at the second point of sale in the State;
Ø Compounded rate for hotels, restaurants and Sweet Halls - Third Schedule;
Ø Goods exempted from tax - Fourth Schedule - Part A and Part B;
Ø Zero rate sale - Fifth Schedule for the international organizations.
In addition to the sale of goods to International Organizations listed in the Fifth Schedule the following shall be zero rate sale and shall be eligible for input tax credit or refund of the amount of the tax paid on the purchase of goods specified in the First Schedule including capital goods, by a registered dealer in Tamil Nadu subject to such restrictions and conditions as may be prescribed.
Ø A sale specified under Sec. 5(3)(1) of the Central Sales Tax Act, 1956; and
Ø Sale of goods to any registered dealer located in Special Economic Zone in Tamil Nadu, if such registered dealer has been authorized to establish such units by the authority specified by the Central Government in this behalf.
The dealer, who makes zero rate sale, shall be entitled to refund of input tax paid or payable by him on purchase of those goods, which are exported as such or consumed or used in the manufacture of other goods that are exported subject to such restrictions and conditions as may be prescribed.
Where the dealer has not adjusted the input tax credit or has not made a claim for refund within a period of 180 days from the date of such accrual of such input tax credit such credit shall lapse to the Government.
Issue of Invoice:
Every registered dealer shall issue bill or invoice for each sale in triplicate showing the particulars of goods and quantity sold with its value, one copy of which must be retained for check by the officials of the commercial tax department. The invoice shall contain the rate and tax charged, the TIN of the seller and that of the buyer, in the case of the buyer is a registered dealer.
Rounding of Tax:
The amount of tax shall be rounded off to the nearest rupee and, for this purpose where such amount contains a part of a rupee consisting of paise, then if such part is 50 paise or more, it shall be increased to one rupee and if such part is less fifty paise, it shall be ignored.
Mode of Payment:
The tax due under this Act shall be paid-
Ø By remittance into State Bank of India or any other bank authorized by the Government from time to time; or
Ø By remittance in cash into a Government Treasury or to the assessing authority or other officer empowered to make the demand or authorized to make the collection; or
Ø By means of a crossed cheque drawn in favor of the assessing authority on any one of the banks situated within the city/town where office of the assessing authority is situated; or
Ø By any other mode as authorized by the Government from time to time.
The method of payment by means of cheque shall not be applicable to the casual traders and to the dealers whose cheque got dishonored for want of funds on more than one occasion.
Turnover means the aggregate amount for which goods are brought or sold, or delivered or supplied or other disposed of in any of the sales, by a dealer either directly or through another, on his own account or on account of others, whether for cash or for deferred payment or other valuable consideration. The proceeds of the sale by a person other than tea and rubber grown within Tamil Nadu by himself or any land in which he has an interest whether as owner, usufructuary mortgagee, tenant or otherwise shall be excluded from the turnover.
Any amount charged by a dealer by way of tax, separately without including the same in the price of the goods sold, shall be included in the turnover.
Any amount realized by a dealer by way of sale of his business as a whole shall not be included in the turnover.
The total turnover means the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not, the whole or any portion of such turnover is liable to tax.
Taxable turnover means the turnover on which a dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed.
The taxable turnover of the dealer to pay tax on transfer of property in goods involved in the execution of works contract shall be arrived at after deducting the following amounts from the total turnover of the dealer, namely:-
Ø All amounts involved in respect of goods involved in the execution of works contract in the course of export of the goods out of the territory of India or in the course of import of the goods into the territory of India or in the course of inter state trade or commerce;
Ø All amounts relating to the sale of any goods involved in the execution of works contract which are specifically exempted from tax under the Act;
Ø All amounts paid to the sub-contractors as consideration for execution of works contract whether wholly or partly; No such deduction shall be allowed unless the dealer claiming deduction, produces proof that the sub contractor is a registered dealer liable to pay tax under this Act and that the turnover of such amount is included in the return filed by such sub-contractor;
Ø All amounts towards labor charges and other charges not involving any transfer of property in goods, actually incurred in connection with the execution of works contract, or such amounts collected at the rate specified in column 3 of the table below, if they are not ascertainable from the books of accounts maintained and produced by a dealer before the assessing authority.
Types of works contract
Labor or other charges as a % value of the works contract
All Structural Contracts
Watch and/or clock repair contracts
All Other Contracts
Ø All amounts, including the tax collected from the customer, refunded to the customer or adjusted towards any amount payable by the customer, in respect of unexecuted portion of works contract based on the correctness on account of measurements or check measurements, subject to the conditions that-
§ the turnover was included in the return and tax paid; and
§ the amount including the tax collected from the customer is refunded or adjusted within a period of six months from the due date of filing of the return in which the said amount was included and tax was paid.
Levy of Taxes:
The following dealers shall pay tax under this Act:
Ø A Casual dealer irrespective of his turnover for a yea;
Ø Agent of a non resident dealer irrespective of his turnover for a year;
Ø Every dealer other than a casual dealer or agent of a non resident dealer, whose total turnover for a year is not less than Rs.5 lakhs;
Ø Every dealer other than a casual dealer or agent of a non resident dealer whose total turnover in respect of purchase and sale within Tamil Nadu is not less than Rs.50 lakhs;
In the case of the goods specified in Part B or Part C of the First Schedule, the tax under this Act shall be payable by a dealer on every sale made by him within Tamil Nadu at the rate specified therein. The tax payable by a registered dealer shall be reduced in the manner prescribed, to the extent of tax paid on his purchase of goods specified in Part B or Part C of the First Schedule, inside the State, to the registered dealer who sold the goods to him.
Every dealer, who deals in the goods specified in the Second Schedule, shall pay a tax, for each year on the sale or purchase of such goods at the point and at the rate specified therein. The dealer shall not be entitled to input tax credit on tax purchased by him.
Levy of Taxes on second and subsequent sales:
Every dealer who effects second and subsequent sales of goods purchased within Tamil Nadu, whose total turnover for a year is less than Rs.50 lakhs, may, at his option, instead of paying tax on every sale, pay a tax for each year, on his total turnover at such rate not exceeding 1% as may be notified by the Government. Such option shall be exercised by the dealer within 30 days from the date of commencement of the Act. Such dealer shall not collect tax exceeding the rate notified by the Government. Such dealer shall not be entitled to input tax credit on goods purchased by him. The dealer who purchased goods from such dealer shall also not be entitled to input tax credit on the goods purchased by him.
Tax on goods with containers or packaging materials:
When goods are sold together with containers or packing materials, the rate of tax applicable to such containers or packing materials, as the case may be, shall, whether the price of the containers or packing materials is charged separately or not, be the same as those applicable to the goods contained or packed and the turnover in respect of containers and packing materials shall be included in the turnover of such goods.
Where the sale of goods, packed in any container or packed in any packing materials, in which such goods are packed, is exempt from tax, then the sale of such containers or packing materials shall also be exempt from tax.
Levy of Tax on right to use any goods:
Every dealer shall pay for each year a tax on his taxable turnover relating to the business of right to use any goods, for any purpose, which shall be arrived at after deducting the amounts involved in the business of transfer of the right to use any goods for any purpose, in the course of export of the goods out of the territory of India or in the course of import of the goods into the territory of India, at such rates specified in the First Schedule.
The dealer shall be entitled to input tax credit on the goods specified in the First Schedule, purchased by him to the extent of the output tax paid or payable as may be prescribed.
Levy of tax on Works Contract:
Every dealer shall pay for each year a tax on his taxable turnover relating to his business of transfer of property in goods involved in the execution of works contract, either in the same form or some other form, which may be arrived at in such manner as may be prescribed, at such rates as specified in the First Schedule. Where any works contract involves more than one item of work, the rate of tax shall be determined in the First Schedule purchased by him in this State.
Payment of tax at compounded rate by works contract:
Every dealer may, at his option, instead of paying tax on the total value of the works contract executed by him in a year, tax calculated at the following rates:
Ø Civil works contract - 2% of the total turnover of the total contract value of the civil works executed;
Ø Civil maintenance works contract - 2% of the total contract value of the maintenance works executed;
Ø All other works contract - 4% of the total contract value of the works executed.
Any dealer, who executes works contract, may apply to the assessing authority along with the first monthly return for the financial year or in the first monthly return after the commencement of the works contract, his option to pay the tax and shall pay the tax during the year in the monthly installments and he shall furnish such return within such period and in such manner as may be prescribed. The option exercised shall be final for that financial year.
A dealer shall not be required to maintain accounts of his business except the records in original of the works contract, extent of their execution and payments received or receivable in relation to such works contract, executed or under execution. The dealer is not entitled to input tax credit.
Levy of tax on food and drinks:
Every dealer shall pay tax on the sale of ready to eat unbranded foods including sweets, savories, unbranded non alcoholic drinks and beverages served in or catered indoors or outdoors by star hotels recognized as such by Tourism Department of the State Government or Government of India and restaurants attached to such hotels at the rate of 12.5% of the taxable turnover;
Every dealer other than those mentioned in the previous para shall pay tax on the sale of ready to eat un-branded foods including sweets, savories, un-branded non alcoholic drinks and beverages served in or catered indoors or outdoors by hotels, restaurants, sweet halls, clubs, caterers and any other eating houses at the rate of 4% of the taxable turnover.
The dealers are entitled to input tax credit on the goods specified in the First Schedule purchased by him in the State.
Every dealer whose turnover is not less than Rs.10 lakhs but not more than Rs.50 lakhs may at his option instead of paying tax as aforesaid pay tax at the rate specified in the third schedule. For this purpose the purchase turnover liable to tax shall be added to the sales turnover. Every dealer who opts to pay tax shall apply to the assessing authority on or before the 30th day of April of the year or within 30 days from the date of commencement of business and shall pay tax in advance during the year in monthly installments and for this purpose he shall furnish such returns within such period and in such manner as may be prescribed. The option exercised shall be final for that year and shall continue for subsequent years until the dealer becomes ineligible or withdraws his option in writing. The dealer shall not collect any amount by way of tax on the sale of food and drinks. The dealer is also entitled to input tax credit on goods purchased by him.
Levy of tax on bullion and jewellery:
Every dealer in bullion, precious stones, gold, platinum and silver jewellery including the articles thereof, whatever be his turnover for the year, shall pay tax on every sale made by him within Tamil Nadu at the rate specified in Part A of the Schedule i.e., 1%. The dealer is entitled to input tax credit on goods specified in the First Schedule purchased by him in Tamil Nadu.
Tax on goods under Central Sales Tax:
Every dealer registered under Central Sales Tax Act, 1956 shall whatever be the quantum of his turn over pay tax for each year in respect of the sale of goods with reference to the purchase of which he has furnished a declaration under Sec. 8(4) of the Central Act, in accordance with the provisions of this Act.
Levy of tax on sugar cane:
Every dealer shall pay a tax on last purchase of sugar cane, excluding sugar cane setts, in Tamil Nadu, at the rate specified in the second schedule. This dealer is entitled to input tax credit on the last purchase of sugarcane.
Levy of Purchase Tax:
Every dealer, who in the course of his business purchases from a recognized dealer or from any other persons, any goods on circumstances in which no tax is payable at that registered dealer on the sale price of such goods under this Act and either-
Ø Consumers of such goods in or for the manufacture of other goods for sale or otherwise; or
Ø Disposes of such goods in any manner other than by way of sale in the State; or
Ø Dispatches or carries them to a place outside the State except as a direct result of sale or purchase in the course of inter-state trade or commerce or in the course of export out of the territory of India; or
Ø Installs and uses such goods in the factory for the manufacture of such goods;
shall pay tax on the turnover relating to the purchase aforesaid at the rate specified in the second schedule of this Act. The dealer shall be entitled to input tax credit on the goods specified in the first schedule.
Tax deducted at source:
Every person responsible for paying any sum to any dealer for execution of works contract shall, at the time of payment of such sum, deduct an amount calculate at the following rates, namely:-
Ø Civil works contract - 2% of the total amount payable to such dealer;
Ø Civil maintenance works contract -2% of the total amount payable to such dealer;
Ø All other works contracts - 4% of the total amount payable to such dealers.
No deduction shall be where-
Ø No transfer of property in goods is involved in the execution of works contract; or
Ø Transfer of property in goods is involved in the execution of works contract in the course of inter-state trade or commerce or in the course of import; or
Ø The dealer produces a certificate in such form as may be prescribed from the assessing authority concerned that he has no liability to pay or has paid the tax;
Ø Where the amount or the aggregate of the amount paid or credited or likely to be paid or credited, during the year, by such person, to the dealer for execution of the works contract including civil works contract does not or is not likely to, exceeds Re.1 lakh;
Any person making such deduction shall deposit the sum so deducted to the assessing authority having jurisdiction over the person or to any authority authorized by the Deputy Commissioner to receive such payment, on or before 20th day of the succeeding month in which the deduction was made within a statement in Form R.
Any person who makes the deduction and deposit, shall within 15 days of such deposit issue to the said dealer a certificate in Form T for each deduction separately, and send a copy of the certificate of deduction to the assessing authority, having jurisdiction over he said dealer together with such documents, as may be prescribed.
On furnishing a certificate of deduction the amount deposited shall be adjusted by the adjusting authority towards tax liability of the dealer and shall constitute a good and sufficient discharge of the liability of the person making deduction to the extent of the amount deposited. The burden of proving that the tax on such works contract has already been deposited and of establishing the exact quantum of tax so deposited shall be on the dealer claiming the deduction.
Any person contravenes shall pay, in addition to the amount required to be deducted and deposited, interest at one and a quarter per month of such amount for the entire period of default.
Where the dealer proves to the satisfaction of the assessing authority that he is not liable to pay tax the assessing authority shall refund the amount deposited after the arrears of tax, if any, due from the dealer, in such manner as may be prescribed.
The tax or interest shall become due without any notice of demand on the date of accrual for the payment by the person. If any person contravenes the whole amount of tax payable shall be recovered from such person and all provisions of this Act for the recovery of tax including those relating to levy of penalty and interest shall apply, as if the person is an assessee for the purpose of this Act.
Liability of Firms:
Where any firm is liable to pay any tax or other amount under this Act, the firm and each of the partners of the firm shall be jointly and severally liable for such payment. Where a partner of a firm liable to pay any tax or any amount under this Act retires, he shall notwithstanding any contract to the contrary, be liable to pay the tax or other amount remaining unpaid at the time of his retirement and any tax or other amount due up to the date of retirement though un-assessed.
Liability of partitioned HUF, dissolved firm etc.,
Where a dealer is a HUF, firm or other association of persons and such family, firm or association is partitioned or dissolved as the case may be-
Ø The tax payable to such HUF, firm or association of persons for the period up to the date of such partition or dissolution shall be assessed as if no such partition or dissolution had taken place and all the provisions of this Act shall apply accordingly;
Ø Every person who was at the time of such partition or dissolution a member of part of the HUF, firm or association of persons and legal representative of any such person who is deceased shall, notwithstanding such partition or dissolution be jointly and severally liable for the payment of tax, penalty or other amount payable by such family, firm or association of persons, whether assessment is made prior to or after such partition or dissolution.
Liability of private company on winding up:
Where a dealer is a private company and such company is wound up, every person who was a director of such company at the time of such winding up shall, notwithstanding such winding up, be jointly and severally liable for the payment of tax, penalty or other amount payable under this Act by such company whether assessment is made prior to or after such winding up unless he proves that the non payment of tax cannot be attributed to any gross neglect, misfeasance of breach of duty on his part in relation to the affairs of the company.
Collection of Tax:
- A non registered shall not collect any amount by way of tax and no registered dealer shall made any such collection except in accordance with the provisions of this Act and the rules made there under;
- If any person or registered dealer collects any amount by way of tax in contravention of the above provisions, the assessing authority may, after giving such a person or dealer a reasonable opportunity of being heard, by order, in writing, impose upon him by way of penalty a sum of, which shall be-
Ø Where the excess amount has been collected in the bonafide belief that it had to be collected 100% of the amount collected;
Ø Where the excess amount has been collected willfully and knowing that it was not due to be collected 150% of the amount collected.
No proceeding shall be commenced after a period of 5 years from the date of order of assessment.
Any person who collects any amount by way of tax or purporting to be by way of tax under this Act contravention of the above said provision, shall on conviction by a Magistrate be liable to fine which may extend to Rs.1,000/-
If any person makes any amount by way of tax and his turnover for the year falls short of the taxable limit specified, the sum so collected shall be remitted to the government and forfeited wholly.
Recovery of tax where business is transferred:
Where the ownership of the business of a dealer liable to pay tax is transferred any tax payable in respect of such business and remaining unpaid at the time of transfer and any tax due up to the date of transfer, though un-assessed may without prejudice to any action that may be taken for its recovery from the transferor, be recovered from the transferee as if he were the dealer liable to pay such tax or other amount. The recovery from the transferee of the arrears of taxes due for the period prior to the date of the transfer shall be limited to the value of the assets he obtained by transfer.
Transfer to defraud revenue void:
Where, during the pendency of any proceedings under this Act or after the completion thereof, any dealer creates a charge on or parts with the possession by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever of any of his assets in favor of any other person, with the intention to defraud the revenue such charge or transfer shall be void as against any claim in respect of tax payable by the dealer as a result of the completion of the said proceeding or otherwise.
Such charge or transfer shall not be void if it is made for adequate consideration and without notice of the pendency of such proceeding under this Act or, as the case may be, without notice of such tax or other sum payable by the dealer or with the previous permission of the assessing authority.