Press Release
Speech of Hon' ble Chief Minister in the Assembly on 03/02/2005
Salient Features of Bill 
Important features on the proposed VAT system in Arunachal Pradesh
Frequently Asked Questions 
Schedules
Forms
Penalties under VAT 
Arunachal Pradesh Goods Tax Rules 2005 
Arunachal VAT Bill (PDF Format)

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Govt. of Arunachal Pradesh 
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SPEECH OF SHRI GEGONG APANG, HON.  CHIEF MINISTER AT THE TIME OF INTRODUCTION OF ARUNACHAL PRADESH GOODS TAX BILL 2005 IN THE LEGISLATIVE ASSEMBLY

Mr Speaker Sir, I rise to introduce the Arunachal Goods Tax Bill 2005 for consideration of the House.

2. Mr. Speaker Sir, before discussing about the legislation, I would like to give a brief background on the Sales Tax System that is applicable now in the State. 

3. Sales tax was introduced in Arunachal in the year 2000, to start with on 5 items. In the year 2001, the list of taxable items was increased to 83. Subsequently, in December 2004, the government had imposed sales tax on all the items as per the Uniform Floor Rates pattern. At present, Sales Tax accounts for a revenue of Rs 21 Crores. The Sales Tax System at present is governed by the Arunachal Pradesh Sales Tax Act 1999, which is a First and Last point tax system, that has been in practice in the country in the last fifty years. 

4. The present system has a number of problems. In the context of our state, the tax which is borne by the consumers of Arunachal Pradesh, on many occasions, goes to the coffers of other states, and hence can-not be used for welfare activities Arunachal. Secondly, administration of Last Point Sales Tax system is very cumbersome both to dealers as well as department. It leads to very high compliance costs to the taxpayers in terms of visits to the department and creation of undue liabilities when forms are not received. For the Tax department, it is highly evasion-prone and most of the time of department goes into preventing evasion rather than providing services.

5. The present system is also not conducive to the trade and economy of the State. The business in the state is not prospering because consumer find it cheaper to procure their supplies directly from Assam. Not many dealership of big companies are coming up in Arunachal because they do not get sufficient turnover in Arunachal. The producers and manufacturers in the state have to carry tax burden on their inputs and hence, their products are not competitive in other states.

6. The need to modernize tax administration and redesign tax policy is an imperative due to the increasing globalization of the economy. In addition, tax reform measures are needed to ensure buoyant revenues, improve voluntary compliance, check evasion and avoidance, and combat corruption. The Value Added Tax (VAT) system is considered the best available option. This tax system is fair, simple and has in-built features that improve compliance. This system has also been recommended by a number of experts and also the Empowered Committee of State Finance Ministers.

7. In the meeting of Committee of Finance Ministers held under the Chairmanship of Union Finance Minister, on 2nd Nov 2004, all the States agreed to implement VAT w.e.f. 1st April 2005. The simultaneous implementation of VAT by all States will enable the creation of a new tax system which is efficient and taxpayer friendly. It seeks to reduce the compliance cost for taxpayers and administrative costs for the Government. The new system is also intended to ensure that the Government of Arunachal Pradesh realizes the tax due on consumption of all goods taking place in the state and also, in order to promote exports from the state, relieve all exporters (including inter state exporters) of the burden of local tax levied. The proposed system seeks to provide a level playing field to honest, tax complying traders.

8. Mr. Speaker Sir, the Arunachal Pradesh Goods Tax Bill 2005 which I introduce today is the VAT legislation prescribed by the Government of India and the Empowered Committee of Finance Ministers. It proposes to replace the Arunachal Pradesh Sales Tax Act 1999 with a VAT system of consumption tax.

9. Mr. Speaker Sir, the VAT system I propose for Arunachal Pradesh will be a package. Along with the implementation of the VAT legislation, we shall issue notification under Section 8(5) of the Central Sales tax Act reducing the CST on all interstate sales from Arunachal against C Form to zero. This is in tune with the concept of VAT where our state will not charge any tax on goods that are exported outside Arunachal Pradesh. This will have two advantages. Firstly, it will make the goods produced in Arunachal economically competitive in other states. Secondly, It will promote opening of dealership in Arunachal as such dealership would also be able to tap the Assam market in neighborhood. The Empowered Committee of Finance Ministers has recommended the reduction of CST to zero by 2007. However, for the betterment of the trade and economy of the State, we shall implement it simultaneously with VAT.

10. Mr Speaker Sir, I have the privilege to inform the house that we have tried to make the VAT legislation as progressive as possible. We have gone ahead and provided more dealer friendly policies then that are being provided by many other states. I will take this opportunity to enumerate some of them:
 

  (1) Upfront credit of tax paid on capital goods :- Many States, in order to protect their revenues in initial years, have staggered the credit that can be availed on purchase of Capital Goods to five years. Our legislation however provides full upfront credit, in the same month in which purchases have been made. This will promote Capital Investment in the State.

  (2) Credit Available for All Business inputs :- Many State legislation have provided for credit only in respect of Capital goods or raw materials. However, in our legislation, we have provided for full input tax credit in respect of all business inputs.

  (3) Option of Cash Refund :- Many state legislations have prescribed for carry forward of refunds to subsequent quarters, until end of financial year. This un-necessarily locks up the dealer’s investment. We have however prescribed for cash refund for each quarter, unless it is opted by the dealer to carry forward.

  (4) Uniform Registration threshold for all dealers:- The threshold prescribed in the proposed legislation is Rs. 5 Lakhs, meaning thereby dealers having a turnover below this amount are not required to register, or pay VAT. Many States have excluded Inter-state importers or exporters from this facility. Our legislation makes no such exception.

  (5) VAT-able Entry Tax : The proposed legislation prescribes for a Entry tax on all imports coming into Arunachal. This is to protect the Arunachal Trade and Commerce from businesses located outside the State, who make direct supply to consumers. For Arunachal businesses, they can avail full credit o entry tax paid on their imports, so that there is no double taxation on them.

  (6) In order to avoid road congestion at the borders for charge of entry tax, there is a provision of Approved Transporters, and for goods imported through Approved Transporters, the liability to pay the entry tax has been deferred till the point of delivery of goods to the importers. Hence, for imports through Approved tansporters, the truck need not stop at the border posts.

  (7) In order to avoid situation of frequent refunds in case of re-exporters, there is a concept of Approved Warehouses. No entry tax would be levied on goods imported and stored in Approved warehouses.

11. Mr. Speaker Sir, Arunachal VAT legislation, like all other VAT legislations have concept of self assessments, availability of tax credit on the basis of Tax Invoice, No Declaration Forms, option for simplified accounting methods and normal penal provisions. The Bill seeks to place utmost confidence in the dealer and would accept the returns in the self assessment filed by them without any hesitation. However, in case, where tax evasion is detected, such unscrupulous dealers shall be severely dealt with under the penalty provisions.

12. Mr Speaker Sir, the proposed legislation is also beneficial to the government in terms of revenue yield. It is expected that with VAT in force, the tax revenues shall grow from the present 20 – 25 Crores to 50 – 60 Crores.

13. With these words, I Introduce the Arunachal Goods Tax Bill 2005 for the consideration of this August House.



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PRESS RELEASE

GOVERNMENT OF ARUNACHAL PRADESH
DEPARTMENT OF TAX AND EXCISE
CIVIL SECRETARIAT, ITANAGAR, 
ARUNACHAL PRADESH 791111  

                                                                                           Dated 3- Feb-2005

Sub : Legislation for VAT introduced in Arunachal Assembly

Shri Gegong Apang, Hon Chief Minister of Arunachal Pradesh introduced Arunachal Pradesh Goods Tax Bill 2005 in the state assembly today.

In his speech before the House, Hon. Chief Minister expressed his views that the present Sales Tax System has a number of problems, both for tax-payers as well as for the department. It is also not conducive to the growth and development of the economy of the State. He said that business in the State is not prospering because consumer find it cheaper to procure their supplies directly from other states. Dealership of big firms are not coming up because of insufficient turnover. Also, in present system, tax paid by the consumer of Arunachal Pradesh, often goes into the coffers of other States and hence can-not be used for the welfare of the people of Arunachal.

He stated that the VAT system would be beneficial to both the trade and economy of the State as well as to the Government. For Government, VAT will ensure buoyant revenues, improve voluntary compliance, check evasion and avoidance, and combat corruption. For Trade and Commerce, the local business will be protected. The dealers situated outside the state and making direct supplies to the consumers here will not have any tax advantage over the business located in Arunachal. The goods produced in Arunachal when exported to other states will be totally relieved from tax (even on inputs) and hence will become economically competitive in the other states.

The Arunachal Goods Tax Bill and the VAT system proposed has following Salient features-

1. Reduction of CST to zero : Arunachal Government shall reduce the Central Sales Tax applicable in Inter-State Sales to zero simultaneously with VAT introduction. While The Empowered Committee of Finance Ministers and other States have proposed to do so by 2007, Arunachal Pradesh has stolen a march over the other states.

2. Upfront credit of tax paid on capital goods :- Many States, in order to protect their revenues in initial years, have staggered the credit that can be availed on purchase of Capital Goods to five years. Our legislation however provides full upfront credit, in the same month in which purchases have been made. This will promote Capital Investment in the State.

3. Credit Available for All Business inputs :- Many State legislation have provided for credit only in respect of Capital goods or raw materials. However, in our legislation, we have provided for full input tax credit in respect of all business inputs.

4. Option of Cash Refund :- Many state legislations have prescribed for carry forward of refunds to subsequent quarters, until end of financial year. This un-necessarily locks up the dealer’s investment. We have however prescribed for cash refund for each quarter, unless it is opted by the dealer to carry forward.

5. Uniform Registration threshold for all dealers:- The threshold prescribed in the proposed legislation is Rs. 5 Lakhs, meaning thereby dealers having a turnover below this amount are not required to register, or pay VAT. Many States have excluded Inter-state importers or exporters from this facility. Our legislation makes no such exception.

6. VAT-able Entry Tax : The proposed legislation prescribes for a Entry tax on imports coming into Arunachal. This is to protect the Arunachal Trade and Commerce from businesses located outside the State, who make direct supply to consumers. For Arunachal businesses, they can avail full credit o entry tax paid on their imports, so that there is no double taxation on them.

7. Approved Road Transporters: In order to avoid road congestion at the borders for charge of entry tax, there is a provision of Approved Transporters, and for goods imported through Approved Transporters, the liability to pay the entry tax has been deferred till the point of delivery of goods to the importers. Hence, for imports through Approved transporters, the truck need not stop at the border posts.

8. Approved Warehouses: In order to avoid situation of frequent refunds in case of re-exporters, there is a concept of Approved Warehouses. No entry tax would be levied on goods imported and stored in Approved warehouses.

The Arunachal Goods Tax Bill 2005 prescribes for four tax slabs, apart from exempted goods. Essential items like Food grains, vegetables meat & fish, seeds & saplings, books, bread are exempted. Gold, silver articles and precious stones etc. are at 1% slab. Industrial inputs, IT products, agriculture implements, medicines, edible oils etc. (a list of 275 items) are at 4% slab. Liquor and petrol will attract 20% tax as it is now. Remaining items are taxable at a general rate of 12.5%.

The Arunachal VAT legislation, like all other VAT legislations has concepts of self assessments, availability of tax credit on the basis of Tax Invoice, No Declaration Forms, option for simplified accounting methods and normal penal provisions. The Bill ensures that there is no multiple taxation of the same commodity and if tax has already been levied on a particular commodity, further tax will only be levied on the value added by that particular dealer. The Bill seeks to place utmost confidence in the dealer and would accept the returns in the self assessment filed by them without any hesitation. However, in case, where tax evasion is detected, such unscrupulous dealers shall be severely dealt with under the penalty provisions.

With VAT in place, the Tax revenue of the Government is also likely to increase from present Rs. 20 Crores to approximately Rs. 50 Crores.

Salient provisions of the Bill is enclosed for information.



                                                                                                                                    Manish Gupta
                                                                                                           Commissioner
                                                                                                        (Tax and Excise)


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Salient Features of Bill 

The key features of the Arunachal VAT System.
1. Central Sales Tax shall be zero. – The Government has decided that CST on interstate sales from Arunachal shall be reduced to zero simultaneously with introduction of VAT.
2. The Act ensures that there is no multiple taxation of the same commodity and if tax has already been levied on a particular commodity, further tax will only be levied on the value added by that particular dealer.
3. Entry Tax — liability to pay is on importers. However petty imports, temporary imports etc. (As per the VIII Schedule) are exempt from entry tax. The Entry tax is VATable, i.e., full tax credit of entry tax shall be allowed to the business importing the goods
4. If entry tax is levied on a particular goods, the same is allowed to be set off against the tax liability of the importer so that there is no double taxation.
5. Tax Rate - 8% slab removed. The proposed tax rates under VAT system are exempt, 1%, 4%, 12.5% and 20%. Powers given to the government to reduce the slab tax-rate
6. Higher threshold (Maximum limit Rs 5 lacs for all dealers) proposed for registration (Present — Rs 1 lakhs for dealers and nil for importer/exporter). This will relieve nearly 40- 50 per cent of the existing dealers from VAT liability, without compromising on the revenue buoyancy. To bring simplicity, taxable quantum/ threshold in all cases, (whether manufacturer, trader or contractor) shall be uniform.
7. No differentiation is made in case of normal sale, sale in the course of Works Contract or transfer of right to use goods. One can sell goods using any of the methods and the tax shall be charged only once at the same rate. Similarly, one can purchase goods using any of the methods and can avail tax credit.
8. The Act allows tax credit for all business inputs (and not just the trading/raw material stock) which is used to produce a taxable output.
9. The Act includes ‘specified services’ in the definition of business. [services are not taxable, but sale of goods by certain service providers like banks are proposed to be made taxable]. Agriculture and horticulture activity to produce taxable outputs (such as tea, medicinal herbs etc.) also included in the definition of business in order to include them into VAT system.
10. The Act will give a impetus to the inter-state sales from the State because of its tax credit mechanism. That is to say, in case of inter-State sales or exports, the entire local tax levied at the time of purchase will be set off / refunded to the dealer. 
11. In order to ensure that in the cases of exporters and inter-State sellers, their capital does not get blocked with the department, there is a provision of refund which can be availed at the end of each quarter after filing quarterly returns.
12. The Act provides for -
      — Refunds to be given within 2 months of filing return in all cases, except where the dealer is being 
          audited/investigated 
      — Self-assessment provisions streamlined — leading to faster refunds
      — Taxpayers also allowed to file monthly returns which will lead to faster refunds
13. Registered Dealers receiving goods through Approved Road Transporters not required to pay entry tax till the time they actually take delivery of the goods or 15 days after entry of goods into Arunachal, whichever is earlier. This will relieve the requirement of payment of tax at borders or pre-payment of tax in advance for majority of importers
14. Concept of Bonded Warehouses introduced for facilitating businesses using Arunachal as a transit point for further distribution of goods — would relieve such businesses from the burden of entry tax for a re-exporter.
15. Concept of return itself to be the self assessment and no departmental assessment if proper return is filed. Department to conduct Audits at dealers’ premises only in a small percentage of selected cases.
16. The stock of goods as on the date of commencement of this Act, which has suffered tax under Delhi Sales Tax Act shall be given benefit of tax credit.
17. Sales to the embassies and international organizations to be taxed by the dealers. However, such embassies and international organizations can claim refund from the department.
18. No concept of Declaration form. The transactions shall be documented using tax and retail invoices which can be printed by the dealer himself. Tax invoice and retail invoices issued by the dealer to form the basis for VAT credits.
19. If a particular dealer is exempted from payment of tax, he is prohibited to claim any input tax credit as well as to issue a tax invoice. However, full input tax credit shall be available to exporters.
20. The Bill seeks to place utmost confidence in the dealer and would accept the returns in the self assessment filed by them without any hesitation. However, in case, where tax evasion is detected, such unscrupulous dealers shall be severely dealt with under the penalty provisions.
21. The limitation for disposal of first appeals of 3 years has been prescribed in order to ensure their timely disposal.
22. Simplified accounting rules have been prescribed for small retailers
23. Notional input tax credits allowed for second hand goods dealers to promote such business.

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Important features on the proposed VAT system in Arunachal Pradesh. 

Salient provisions of the proposed Arunachal Goods Tax Bill, 2004

• Chapter I – Preliminary 
  This chapter contains the short title, extent and commencement of the proposed Arunachal Goods Tax Act, 2004 (“the Bill” or “the Act”). In addition, this chapter also contains the definitions of the various terms used in the Bill. 
  The important definitions in this regard are business, dealer, goods, importer, input tax, output tax, sale, sale price, transporter, turnover and value of goods.
  Significantly, the definition of sale includes transfer of property in goods (whether as goods or in some other form) involved in execution of a works contract, transfer of right to use goods (leases), etc. This has the effect of consolidating the levy of tax on sale transactions as has been defined in Article 366 (29A) of the Constitution.
  

• Chapter II – Incidence and Levy of Tax
  This chapter contains the main provisions relating to levy of tax on sales made within the State of Arunachal (output tax) as well as the levy of tax on entry of goods into Arunachal (entry tax) for use, sale or consumption therein. 
  The levy of output tax is on sales made by registered dealers (including dealers required to be registered under the Act). The levy of entry tax is on the importer of goods into Arunachal.
  This chapter also contains the provisions relating to the manner of payment of output tax and entry tax in various situations. The rates of tax, taxable turnover, exemptions from payment of tax, grant of input tax and entry tax credits and grant of input tax credit in respect of tax paid stocks brought forward during transition from sales tax to goods tax are also dealt in detail in this chapter. The chapter also sets out the manner of adjustment of tax credits against the tax liability of the dealer.
  The provisions allow full credit of the taxes paid on inputs, including the entry tax, thereby eliminating any cascading of taxes. The mechanism in which the credits would be allowed, would enable the businesses to have a transparent system of taxation and also eliminate the need to obtain any declaration forms from the authorities. This would lead to less frequent interaction between the taxpayers and the authorities, leading to better efficiency and lower corruption.
  The ability of the Government to collect tax at every stage of the value addition chain would lead to a more reliable, stable and buoyant source of revenue.
  

• Chapter III – Special Regimes
  Chapter III contains provisions to deal with certain special situations for a smooth and equitable operation of the tax. Specifically, it contains provisions to deal with input tax credits in respect of second hand goods and enables the Government to provide for a simplified accounting method for retailers and other small dealers. 
  These provisions would allow input tax crediting in respect of goods that had left the tax base and which are re-introduced in the tax base thereby leading to a more equitable treatment of second hand goods dealers. Further, the simplified accounting scheme for retailers would relieve such dealers from maintaining detailed accounts in respect of their sale and purchase transactions.
  

• Chapter IV – Registration and Approval
  This chapter deals with registration provisions in respect of dealers liable to tax under the Act. The provisions contained in this chapter also deal with approval of road transporters bringing goods into Arunachal for the purposes of efficient administration of entry tax. 
  This chapter also introduces the concept of bonded warehouses, which can be used by businesses that bring goods into Arunachal only for transit purposes, thereby, conserving and facilitating the distributive character of Arunachal. This concept would have the effect of making Arunachal an attractive destination for trading in goods.
  The chapter contains provisions prescribing penalties on transporters and bonded warehouse operators for contravention of the provisions of the Act. 
  The chapter sets out in detail the consequences of registration under the Act, the circumstances in which the registration certificate may be amended, cancelled and consequences of de-registration. 
  

• Chapter V – Returns and Return Defaults
  This chapter contains provisions requiring filing of returns and payment of tax in respect of transactions covered under the Bill. The detailed provisions encompass, correction of errors in returns, signing of returns, penalties for failure to pay tax and file returns, etc. 
  The provisions are simple and transparent, thereby, reducing ambiguities and uncertainties as well as making the functioning of the tax administration smooth and non-pervasive into businesses.
  

• Chapter VI – Assessment, Refund and Recovery of Tax
  The chapter specifies that the assessment under the Act would be way of Self-Assessment. It contains provisions for default assessments by the authorities, where a person, required to file a return under the Act, fails to do so, or furnishes an incomplete or incorrect return. 
  The chapter also contains provisions for conducting an audit of the taxpayers and reassessments pursuant to such audits. The provisions also specify the limitation for conducting assessments.
  This chapter also specifies payment of interest in cases of delayed refunds or delayed payment of tax. Other provisions in this chapter deal with powers to withhold refunds in specified cases, refund of tax to embassies, international organisations, etc., recovery of tax, continuation of certain recovery proceedings and special modes of recovery.
  The concept of self-assessment would relieve the tax administration from the burden of pending assessments and would enable refocusing of the resources to more productive activities like taxpayer services, audits, enforcement, etc.
  

• Chapter VII – Recovery of Tax, Interest and Penalties
  This chapter contains the provisions relating to collection and recoveries of tax, penalties and interest arising under the Act. 
  

• Chapter VIII – Accounts and Records
  The provisions in this chapter cover the requirements of details to be incorporated in tax invoices and retail invoices. 
  The provisions also specify the manner in which the taxpayers are required to maintain accounts in respect of transactions covered by the Bill. In addition, the treatment of credit notes and debit notes issued in respect of relevant transactions is also covered.
  The chapter further provides for special independent audits in specified cases.
  These provisions minimise the scope for any ambiguities in relation to maintenance of accounts as well as assist in bringing an uniformity in relation to documentary requirements.
  

• Chapter IX – Liability in Special Cases
  This chapter contains provisions to specify liabilities to tax and other dues under the Bill in cases of transfer of business, companies in liquidation, partners of partnership firms, guardians/trustees, court of wards, etc.
  

• Chapter X – Powers of Investigation and Enforcement
  This chapter seeks to enable the authorities to demand production of accounts and other relevant documents inter alia for the purposes of investigations under the Act, search premises, seize documents, etc. The provisions further enable the authorities to require specified persons to produce documents, information and other details for the purposes of the Act. 
  The chapter also requires owners of cold stores, warehouses, godowns, etc., to maintain accurate accounts (including value, quantity, date of delivery, etc.), of goods stored in such places.
  The provisions contained in this chapter also enable the authorities to call for information for the purpose of collecting statistics for administration of the Act. And for setting-up of check-posts and barriers.
  

• Chapter XI – Goods Tax Authorities and Appellate Tribunal
  The chapter enables appointment of a Commissioner of Goods Tax and other subordinate officers to administer the Act. Provisions relating to delegation of powers of the Commissioner and powers relating to transfer of proceedings under the Act are also incorporated. 
  The chapter further empowers the Lieutenant Governor to set-up an Appellate Tribunal to undertake specified appellate functions in relation to proceedings under the Act.
  

• Chapter XII – Objections, Appeals, Disputes and Questions.
  This chapter deals with dispute resolution processes, viz., objections, appeals, and statement of cases to the High Court in relation to proceedings under the Act. The chapter sets out in detail circumstances in which recourse to such process can be had and the manner in which such proceedings would be conducted. 
  The chapter also empowers the Commissioner to determine certain questions in specified circumstances. 
  This chapter contains provisions relating to the manner in which specified proceedings under the Act would be conducted, covering, inter alia, service of notices, appearance before authorities including through authorised representatives, powers of the Commissioner and other authorities to take evidence on oath, extension of period of limitation, etc. 
  

• Chapter XIII– Offences and Penalties
  This chapter deals with imposition of penalties for certain offences under the Act. This also includes provisions relating to cognizance of offences, offences by companies, investigation of offences, compounding of offences, etc. 
  

• Chapter XIV – Miscellaneous
  This chapter contains miscellaneous provisions in relation to administration of the Act. These include, confidentiality of returns and information furnished under the Act, power to make rules to carry out the purposes of the Act, power to issue forms, power to amend schedules, power to issue orders to remove difficulties, etc.
  This chapter also repeals the existing Arunachal Sales Tax Act, 1999. The chapter also contains certain savings provisions in respect of the repealed act.
  
  
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FREQUENTLY ASKED QUESTIONS ON VALUE ADDED TAX (VAT)

1. What is VAT?
A. Unlike the name suggest, VAT is NOT a tax on the margin of the business. VAT is a Consumption Tax, meaning, tax on consumption of goods by the consumers. VAT is to be borne by the consumers.

2. What is the similarities and differences between Sales Tax and VAT?
A. Both Sales tax and VAT are Consumption tax. To take an example, if a consumer consumes a goods worth Rs. 100 on which tax rate is 10%, the objective of both the system is to collect Rs 10 (i.e. 10% of Rs 100) to the Government. Both are Indirect Tax, meaning the consumer does not pay the tax to directly the government, but to the business from whom he has purchased the goods. The business remits it to the Government.
In Sales tax, the entire tax collected from the consumer by the dealer is paid by one of the dealer (out of the chain through whom the goods have passed). Chain meaning Chain of business comprising of Manufacturer -Wholeseller – Intermediate – Retailer etc. To take the above example, the said tax of Rs. 10 would be collected from one of the person in the chain, it can be the manufacturer or Wholeseller or the Retailer (depending on the type of Sales tax system in the State). In VAT system, the same Rs 10 would be collected in installments from every dealer in the chain. Each dealer will contribute a portion of the tax in proportion to his margin of operation.

3. Does VAT System increase the incidence of Tax on consumer?
A. No. The tax incidence remains the same.

4. Will VAT system complicate the Book of Accounts to be maintained by the dealer?
A. No. On the Other hand, it will simplify it. A dealer is expected to maintain two registers. Sales Book and Purchase Book. In Sales Book, he would record chronologically sales made and tax collected from the purchaser. In Purchase book, similarly, he will record purchases made and tax paid on such purchases.

5. How will the Net Tax payable be calculated?
A. First, the ‘Output tax’ is calculated from Sales Book by adding the tax collected from the consumer in respect of sales made in the quarter. Then ‘Tax Credit’ is calculated by adding the tax paid on purchases made in the same quarter. The Net tax payable is the Output Tax minus Tax Credit. If this value is negative, dealer gets a refund from the department in that quarter.

6. What kind of purchases are eligible for Tax Credit?
A. All business inputs, be it raw material, capital goods, computer, record books or anything which is used by the dealer to conduct his business. However there are two exceptions. Tax Credit can-not be availed in respect of purchase of items used for conducting business of Exempt items. Also there is a list of ‘non-creditable purchases’ specified in the Seventh Schedule of the A.P. Goods Tax Bill.

7. What is the implication of reduction of CST to zero, as announced by the Chief Minister?
A. It means that if a dealer in Arunachal Pradesh makes a sale to a dealer outside Arunachal Pradesh, no tax will be charged by the Government of Arunachal Pradesh. In addition, if any tax is paid on inputs to produce or trading of the said item, it will be eligible for tax credit.

8. Is any declaration Form required for claiming zero CST for interstate sales?
A. Yes. Sale can be made against any CST declaration form such as C-Form, F-Form, H-Form etc.


9. What is Entry Tax? Will it not make purchases of a dealer in Arunachal more costly?
A. Entry tax is a tax levied on all imports into Arunachal. It is levied on all importers, (whether dealers or consumers) so long as the value of goods imported is more than Rs. 10,000. This entry tax levied is fully VAT-able, i.e., a dealer making resale of such goods or use of such goods in his business, can claim full tax credit of entry tax paid. Thus Entry tax will not be an additional levy on the business, but on the other hand will protect the Arunachal business from the dealers of Assam, who make direct sales to consumers in Arunachal Pradesh. It gives level playing field to honest tax complying dealers.

10. Will Entry Tax not cause hindrance in movement of goods at the borders?
A. Mostly No. The importers will be expected to pre-pay the entry tax due at the Starting locations itself (such as Guwahati) before commencement of movement of goods, and carry the proof of payment. If the goods are imported through ‘Approved Road Transporters’, entry tax can be pain in Arunachal before taking the delivery of the goods. Such vehicles can pass across the borders without stopping.

11. I make purchases on Inter-state basis. Do I get credit of CST charged on such purchases?
A. No. CST has been charged by the state of origin, and hence, Arunachal government will not give any credit on account of tax charged by the other State Governments.

12. Is Registration compulsory?
A. No. Registration is compulsory only to dealers whose turnover in the year exceeds Rs 5 Lakhs. For other dealers, it is optional.

13. Can VAT system work on items where MRP inclusive of tax is prescribed?
A. Yes. MRP can be inclusive of tax. Tax component and tax exclusive price can be calculated by applying tax fraction [r/(r+100) where r is the tax rate] on the MRP.


14. Will dealers be allowed to sell their goods without charging sales tax separately ?
A Dealers can include tax on the sale price.

15. How will MRP mentioned on the goods be calculated in the VAT system ?
A. MRP can be inclusive of tax and tax can be calculated by applying tax fraction.

16. Will Central sales tax be abolished ?
A. Central Sales Tax Act will not be abolished because it is required for documentation of Inter-state sales. However, for Inter-state sale made from Arunachal, the CST rate (against C form) shall be zero. (Presently this rate is 4%)

17. Will first point tax end ?
A. Yes, the first point tax would end.

18. Will the entry tax applicable be collected at the State borders ?
A. Normally, entry tax will not be payable at borders. It is to be paid by the importer before he receives delivery of goods. We propose to install Facilitation Counters at rail, roads and airports to provide additional avenues for tax payment.

19. Would entry tax have an negative impact on the imports to the state ?
A. No, entry tax just ensures levy of tax on all goods coming into Arunachal. It does not make imports difficult; on the other hand, it gives level playing field to honest tax complying traders.

20. Would there be uniform tax rates across the states implementing VAT ?
A. Tax system should be such that no trade diversion takes place despite tax differentials. There may exist some differential tax rates for each state implementing VAT. Uniform tax rates takes away the leverage of states to optimize their revenues.

21. Is the tax rate going to be the same all over India ?
A. Yes with minor variations.

22. Are the tax rates the same for all items ?
A. There would be two basic slabs of 4 percent 12.5 percent in which most of the goods will get covered. Apart from this a very few items shall have 1% and 20% tax rate. Essential items like foodgrains etc. shall be exempt.

23. Can dealers below the threshold register ?
A. Yes, Voluntary registration is available.

24. Will RC No. of purchasing dealer be required to be recorded for each transaction?
A. For retail/consumer sale, details of purchaser is not required. Sale to registered dealers, which are to be covered under tax invoices, name and address of purchasing dealer has to be recorded.

25. What if the total sales in the quarter are less than the purchases (and stocks are carried forward in the next quarter)?
A. You can carry forward the net credit in your favour to the next quarter.

26. What if my total tax liability on outputs is less that the tax levied on purchases?
A. You can claim refund after each return.

27. Would dealers be permitted to adjust the tax credit in the next financial year ?
A. Yes, dealers would be allowed to adjust the tax credit in the next year.

28. Will refund be carried forward to the next year ?
A. Yes, you will be allowed to carry forward refund to the next year.

29. Would credit be given on the tax paid on the opening stock on the commencement of the act ?
A. Yes, credit would be given on the tax paid on the opening stock on the commencement of the act.

30. With the implementation of VAT, would dealers be required to keep more working capital ?
A. No. The tax on the stock inventory is to be paid from the tax collected by you on your sales and not from your pocket.

31. What is the frequency of returns ?
A. The frequency of returns is quarterly for those dealers with annual turnover less than Rs.5 crore and monthly for those with annual dealers with annual turnover more than Rs. 5 crore. However, you can choose to file monthly returns even if your turnover is below Rs. 5 crore.

32. By how much time will refunds be paid ?
A. The refund will be paid within 30 days. In case of a delay, interest will be paid on the refund amount.

33. What is the rate of interest in case of delayed refunds ?
A. The rate of interest of late payment is 1 percent. This rate is as prescribed for delayed payment for Income tax/Excise laws.

34. What is the documentation required to be submitted with the return to get refunds ?
A. Normally, proof of exports is required to be submitted with the return to get refunds.

35. Which inputs can I claim set-off of ?
A. Any business inputs which is used to produce a taxable output in Arunachal is allowed for set-off. However, there is a list of items that if consumed even in business process are not allowed for input tax credit.

36. Apart from input credit on raw material would dealers be allowed to claim credit on other costs like labor, overheads ?
A. VAT paid on any business input would be allowed to be set off. Since services are not a part of VAT as of now, no tax is levied on it and no credit allowed. However, in future, when services will be included, full credit shall be given even for service inputs.

37. I am a manufacturer. Goods manufactured by me are both taxable and exempt. How do I do the entries in the Purchase Book when the inputs are purchased ?
A. Inputs (raw material as well as finished goods) that go in exclusively for manufacture of taxable goods are to be put in creditable purchases (provided other conditions are also met). Similarly, inputs that go in exclusively for manufacture of exempt goods are to be put in non-creditable purchases. However, the inputs that go in partially for manufacture of exempt goods and partially for taxable goods, such purchases are to be appropriated in the ratio of taxable : exempt out put. Alternatively, you can maintain two separate inventories of such inputs (a) for use in manufacture of taxable goods and (b) for use in manufacturing of exempt goods. Then, all the purchases that are credited into inventory (a) can be claimed credit of and for all others, credit is not allowed.

38. How do I calculate Input Tax credit on purchases against which partial credit is available?
A. If you are using the second method as explained in the last question, you can avail input tax credit of all purchases of input that you credit into the inventory “for use in manufacture of taxable goods” while all the purchases of inputs that are credited to the inventory “for use in manufacture of exempted goods”, shall not be entitled for input tax credit.
If you are using the first method, at the end of each quarter, the input tax charged on purchases for which partial credit is available, is to be proportionately divided using the following formula : 
Credit Allowed = I * T/(T+E)
I : Input tax charged on purchases, for which partial credit is available, made during the quarter.
T : Total sales of taxable manufactured goods made during the quarter and zero rated sales.
E : Total sales of exempt manufactured made during the quarter + revenues from outputs not available under VAT system.
Finally, at the time of filing the last quarter return, you are required to perform the same calculation based on the total value of purchases for which partial credit is available, and total value of sales (of exempted and taxable manufactured goods) made during the year. This will be the total credit allowable for the year (on account of inputs for which partial credit is available). After adjusting the credits already taken in the previous quarters, the remaining credit can be availed in the last quarter.

39. I am making inter-state sales, which type of invoice am I supposed to issue ?
A. Retail invoices are to be issued in case of interstate sales, interstate branch transfers and exports.

40. Keeping in mind the C & H forms requirements, what is the stipulated time for filing self assessment ?
A. With the streamlining of issue of C forms, CST self-assessment can be completed in 6 months after the close of the year. Filing of return is the Self Assessment under the Arunachal Goods Tax.

41. What are the documents required to be submitted for refunds arising in cases of interstate sales ?
A. You have to file a bank Guarantee of the amount of refund claimed in lieu of Central Statutory forms. This Bank Guarantee shall be released whenever you furnish the Central Statutory forms.

42. I make purchases intended for sale on Inter-State basis. Can I avail input tax credits on such purchase ?
A. Yes, on purchases intended for sale on Inter-State basis as well as exports, input tax credits can be availed.

43. What are the timelines for providing refunds ?
A. Refunds would be provided in 30 days from the date of filing returns.

44. Is a guarantee required for refunds ?
A. Normally not. If the documentation with the return is complete (i.e. you file the C/F forms etc.) no guarantee is to be filed. However, in case where the C/F forms etc. are not filed with returns, bank guarantee equal to the amount claimed as refunds is required until the C/F forms are filed.

45. Can we get refunds or only adjustments ?
A. You can avail of either based on your personal choice.

46. What is an Approved Warehouse ?
A. Approved warehouses are authorized warehouses, where a re-exporter can temporarily store the goods, without levy of Entry Tax on it.

47. Would three be entry tax on goods imported for exports ?
A. If goods are not stored in the Approved warehouses, in such cases, entry tax is required to be paid first and then refunded. There are providing provisions for “Approved warehouses” to take care of such cases and thereby solve the case flow problems of the re-exporters.

48. Will we get set-off for Entry Tax on stock transfers ?
A. If you stock your goods (intended for re-exports) in a bonded warehouse, no Entry Tax is levied. Hence there would be no set-offs either (which means that you can bring goods in Arunachal free of Entry Tax, store it an Approved Warehouse and subsequently branch transfer it again, free of tax). Otherwise also, if you purchase locally /pay entry tax on imports and subsequently branch transfer it, you will get input tax credits on branch transfers also.

49. Should VAT be implemented as long as CST and Entry tax are in force ?
A. VAT is a reform of local tax law, independent of CST, VAT will make Arunachal trade more competitive, irrespective of whether CST rate in Assam and other States is reduced or not. Entry tax is a part of VAT implementation methodology. In fact, VAT can’t work without entry tax.

50. Should VAT be implemented in all states simultaneously?
A. VAT is expected to make Arunachal trade more competitive vis-à-vis other states and therefore it is not necessary for us to wait for other states to implement the same.

51. Are services included in VAT?
A. Services would be included in future.

52. Will exemptions continue ?
A. Yes exemptions would continue of few commodities.

53. Are there any statutory declaration forms under VAT ?
A. There are no statutory forms under VAT.

54. Would the product classification under each category be uniform ?
A. Yes, we are trying to classify products using a uniform system of nomenclature.

55. Is it possible to use old local sales tax number as new sales tax number for VAT?
A. Yes, it is possible to do the same if your turnover exceeds the threshold value (Rs. 5 Lakhs).

56. Will the new registrants have to give surely ?
A. No, only if you are below the threshold, surety is required.

57. What will be the frequency of filing returns ?
A. Frequency of filing returns would be monthly/quarterly.

58. What is the rate of interest on late payment ?
A. The rate of interest of late payment is 2 per cent. This rate is as prescribed for delayed payment for Income tax/ Excise laws.

59. Would dealers be allowed to print their own stationery of statutory declaration forms ?
A. There are no statutory forms under VAT system. Dealers are allowed to print their own tax invoices.

60. How will management of accounts be easier ?
A. Since all sales would be taxable and all purchases be tax paid, the classification/bifurcation of various kinds of taxable/non taxable sales need not be maintained.

61. What is an invoice ?
A. Invoices are crucial documents for administering VAT because they record each supply of goods, whether taxable exempt. They are to be issued by all registered dealers for each of their sales. An invoice establishes both the tax liability of the supplier and the deduction (credit) to the registered purchaser. There are two kinds of invoices that can be issued under VAT i.e. Tax Invoice & Retail Invoice.

62. What kinds of invoices are required for VAT? Why is the name and address of the printer mandatory?
A. Tax and retail invoices for a registered dealer/ consumer sale respectively is a normal VAT practice. Name and address of the printer is not mandatory.

63. What is a Tax invoice and when can I issue it ?
A. If you are making a local sale to another registered dealer of Arunachal, a tax invoice can be issued. Specially, tax invoice should always mention :
· Identity of the seller (with pre-printed registration number, name & address).
· Identity of buyer (with name & address ); and
· Amount charged with the amount of tax charged in the transaction indicated separately.
The purchaser, on the strength of the tax invoice, can claim the benefit of input tax credit of the VAT paid on his purchases. (Provided his purchases are such that credit of the tax paid on them is allowable)

64. What is a Retail Invoice and when can I issue it ?
A. In retail sales, which are much more numerous and of smaller amounts, simplified sale invoices or retail invoices can be issued. Although retail invoice should always identify the seller, indication of buyer’s name is optional and tax charged can be included in the sale price. No tax credit can be availed by the purchaser on the strength of a retail invoice.

65. What kinds of books of accounts are required to be maintained under VAT?
A. The VAT book-keeping is very simple and can be kept even by enterprises that do not maintain full books of accounts or do not use double entry accounting. Taxpayers are essentially required to keep two books:
· Purchases Book ; and 
· Sales Book.
These books are a record purchases and sales respectively and are specifically designed for easy calculation of VAT. Simplicity of record keeping is the major objective in designing of these books.

66. Describe the format of the Purchase Book.
A. The Purchase Book is a record required to be maintained buy all registered dealers. If should be used to log those purchases against which credit is allowed and those against which credit is not allowed, separately.

67. On which purchases can I not take credit?
A. Credit is not allowable for any purchase used for consumption or producing non-taxable output. Further, purchase of fuel for consumption, food, liquor etc. is also eligible for credit.

68. On which purchases can I take credit?
A. You can take credit on all business inputs that are used to produce taxable output.

69. Describe the format of the Sales Book.
A. The sales book is a record to be maintained by all registered dealers, and is used to record the total volume of sale, and to distinguish between export, exempt, inter-state and taxable sale.

70. In case of original tax invoice being lost will credit be allowed on personal surety and not on duplicate invoices?
A. No, this is normal VAT practice.

71. How will the scrutiny be targeted?
A. Scrutiny would be targeted by using computerized selection.

72. Will there be a compulsory scrutiny for returns filed late?
A. No. Continuous default in returns will lead to increased possibility of scrutiny.

73. Will some of the self-assessed returns be scrutinized ?
A. Yes a small percentage will be selected for audit assessment.

74. Would assessment be conducted at the business premise of the dealers ?
A. Yes, this is normal VAT practice.

75. Is there a provision for revision of assessment order in the Arunachal Goods Tax Bill?
A. Appeal provision is available. There is no need for a parallel alternate forum.

76. With the introduction of Entry tax, would transporters be also required to register for VAT?
A. The liability of Entry tax is on importer. If the importer is a businessman, he gets full credit of the entry tax paid. Transporters will have option to obtain an Approval Certificate from the Tax Department.

77. What will be the responsibility of the transporter?
A. If you are an approved transporter, then before handing delivery you must ensure that the importer has fulfilled liability of Entry Tax. If you are not an approved transporter, then before entering Arunachal, you have to ensure that the importer has fulfilled liability of Entry Tax.

78. What happens if I do not do this?
A. You will be liable for penalty.

79. Are Railways and Airlines also covered under the system?
A. Yes.

80. Are transporters required to file any returns?
A. No.

81. Will there be any assessment / audit of the transporters?
A. Yes, transporters, railways, airlines can be assessed / audited for levy of penalty, if any.

82. Is Input Tax credit available to unregistered declares also?
A. For dealers below the threshold and unregistered, there is no out put tax liability nor any input tax credits. However, if you cross the threshold, you are liable for output taxes, and can avail input tax credits. If you choose not to register (even after the crossing the threshold), you are liable for penalty and you don’t get any refunds.

83. Can a registered dealer claim credits for a purchase from an unregistered dealer?
A. No, you cannot claim credits for purchase from an unregistered dealer. However, there is a special “deemed credit” system for purchases of “second hand” goods from unregistered dealers, if you are in the business of sale/purchase of “second hand” goods.

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Content provided by Department of Tax & Excise
Govt. of Arunachal Pradesh