sales tax set off

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shantaram k. palande

shantaram k. palande (Querist)
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03 January 2011 pl tell me procedure for sales tax set off

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)
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04 January 2011 Sir, VAT provision change state to state, so please mention the name of state.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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23 July 2025 Sure! Here's a simple overview of the **procedure for Sales Tax Set Off** (also called input tax credit under VAT regime):

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### What is Sales Tax Set Off?

* It allows a dealer to **adjust the VAT paid on purchases** against the VAT payable on sales.
* Basically, you get credit for the tax you already paid on inputs (purchases) and deduct it from your output tax liability.

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### General Procedure for Sales Tax Set Off:

1. **Maintain Proper Documents**:

* Keep all purchase invoices showing VAT paid.
* Ensure invoices are in your name and contain necessary details (VAT registration no, amount, tax charged, etc.).

2. **Claim Set Off in Returns**:

* While filing your VAT return, declare your sales and output VAT.
* Declare your purchases and input VAT paid.
* The tax paid on purchases will be adjusted against tax collected on sales.

3. **Calculation**:

* Output VAT (on sales) – Input VAT (on purchases) = VAT Payable or VAT Refundable.

4. **Payment or Refund**:

* If output VAT > input VAT, pay the difference.
* If input VAT > output VAT, carry forward the balance or claim refund (as per state rules).

5. **Follow State Specific Rules**:

* Some states have limits or specific procedures for set off (e.g., time limits, block credit on certain items).
* Check state VAT act or consult local tax office for detailed rules.

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### Example Entry in Books:

* On purchase:
**Purchase Account Dr**
**Input VAT/ VAT Recoverable Dr**
**To Supplier (Creditors) A/c**

* On sales:
**Debtors A/c Dr**
**To Sales Account**
**To VAT Payable A/c**

* On payment of VAT (after set off):
**VAT Payable A/c Dr**
**To Bank/Cash A/c**

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If you want, I can help you with the **step-by-step form filling or accounting entries** in your accounting system. Just tell me!

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