Let us understand the words VAT assessment on individual basis. When I say assessment it means to check something of it’s correctness or verification by other person. Similarly VAT as stands for value added tax can be understood as tax on value addition. So can we say that VAT assessment is nothing but verification of tax paid on the value addition.
So what to expect during VAT assessment?
As already said it is verification of tax, so during the assessment the authorities will focus only on those areas where there has been value added.
What will be the area of focus?
Department mainly will focus on two things:
1. Sales on which exemption has been availed.
There are two reasons why department mainly focuses on sales made under any exemption or abatement.
A. Dealers usually don’t make error in charging VAT on sales made at full rate. Even if any error made can be easily traced. So there is less focus on such sales.
B. Usually dealers make mistake while abiding to the language of exemption notification. Department usually focuses on such compliance errors made.
2. Input tax credit (ITC) availed.
ITC is not available on all purchases made. Focus area is where ITC was not available but has been availed by the dealer.
Certain inputs are eligible for partial set off or set off at abated rates. If the credit is availed incorrectly it provides department with an easy target to levy penal charges.