sales tax set off
This query is : Resolved
03 January 2011
pl tell me procedure for sales tax set off
04 January 2011
Sir, VAT provision change state to state, so please mention the name of state.
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):
---
### 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.
---
### 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.
---
### 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**
---
If you want, I can help you with the **step-by-step form filling or accounting entries** in your accounting system. Just tell me!
---
### 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.
---
### 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.
---
### 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**
---
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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