Rajasthan State Budget 2008-09 : An Overview

Indirect Taxes

Registration under taxation enactments is for the benefit of both the Administrative Department and the tax-payer. On the part of the Department, it would be convenient to monitor the activities of the tax-payer. A registered tax-payer receives a number of benefits available under the statute. For example, a registered dealer under the provisions of APVAT Act, 2005 (in short Act) is entitled to receive way bills and thereby have smooth passage of goods through the Check Post. A registered VAT dealer is entitled to claim Input Tax Credit (ITC) and is eligible to issue Tax invoice.

The Act provides for two categories of registered dealers; i.e., TOT dealer and VAT dealer. These terms are defined as follows:—

Section 2(41) ‘Turnover Tax Dealer or TOT dealer means any dealer who is registered or liable to be registered as a TOT’.

Section 2(43) ‘VAT dealer means a dealer who is registered for VAT’.

The difference in the wording is easily understandable. Whereas in the case of TOT dealer, it includes also a dealer, who is liable to be registered as a TOT but in the case of a VAT dealer, only a dealer who is registered for VAT is considered.

‘What are the consequences of failure to register?’ We have to straightaway go to section 49. sub-section (1) provides for imposition of penalty of Rs.5000 if the VAT dealer fails to apply for registration as required under section 17. Under sub-section (2), on failure to get registered as a dealer (VAT or TOT), he shall be liable to pay penalty of 25% of the amount of tax due prior to the date of the registration. ITC is not allowed for sales prior to the date from which the registration is given effect to. As per the proviso under the section, a notice before levying penalty has to be issued.

Section 17 in Chapter IV of the Act deals with Registration of dealers. Sub-section (1) makes it compulsory for every dealer other than a casual trader to get himself registered as per the provisions of the Act. Section 2 (7) of the Act defines a ‘casual dealer’, among others as a person, having occasional transactions of a business nature. The best example is a person, who comes from the other State, and doing business for a short period, say a month in an Exhibition. Such casual dealers need not get themselves registered.

Under sub-section (2) if a dealer, who will be commencing business estimates his taxable turnover at more than Rs. 40 lakhs in 12 consecutive months, he shall get himself registered as a VAT dealer before the commencement of business. This is applicable to a new dealer who is yet to start the business.

One of the important features of registration under the Act is that there is no concept of ‘year’. The periods for the purpose are 12 consecutive months, preceding three months and 12 preceding months. In the case of 12 consecutive months, the period may be April to March, May to April, June to May, July to June etc. It should be remembered that it is not the financial year from April to March. Similarly preceding 3 months for example may be April to June in the case of July, May to July in the case of August, June to August in the case of September, July to September in the case of October, etc. It should be remembered that it is not the quarter. In the same fashion, preceding 12 months may be April to March in the case of April, May to April in the case of May, June to May in the case of June etc. The turnover-threshold limits are to be calculated based on these periods specified in section 17. These provisions are in contrast to financial year used in section 12 of APGST Act, 1957.

Another new concept is ‘taxable turnover’. Under the APGST Act, it was the ‘total turnover’. Section 2(38) of VAT Act defines ‘taxable turnover’ to mean the aggregate of sale prices of all taxable goods. For example, a dealer has sales of curd and butter milk (generally exempted goods) to a tune of Rs. 8 lakhs and the sales of ice cream to a tune of Rs. 3 lakhs. His taxable turnover is only Rs. 3 lakhs for this purpose. As per Explanation I there- under, it shall not include the amount of VAT paid or payable but shall include the sale price of zero rated sales. As per Explanation II, the sale price relating to second and subsequent sale of goods specified in Schedule VI shall not form part of taxable turnover. Schedule VI enumerates liquor, petrol, diesel oil etc. The second and subsequent sale price of these goods do not form part of taxable turnover. For example, a dealer running a petrol pump and making exclusively second sales of petrol and diesel oil need not at all get himself registered as a dealer as his ‘taxable turnover’ is nil. Similarly a retail liquor shop having exclusive second sales of liquor need not get itself registered as a dealer. For the purpose of arriving at ‘taxable turnover’, VAT amount paid or payable need not be included. ‘Zero rated sales’ are defined in Section 2(47) of the Act. Though sale price of zero rated sales is not taxable as such under the Act, but still it forms part of ‘taxable turnover’.

Sub-section (3) is applicable to a dealer who has already been doing business but not registered under the Act. If the taxable turnover of such dealer exceeds Rs. 10 lakhs in the preceding 3 months or exceeds Rs. 40 lakhs in the preceding 12 months, he shall get himself registered as a dealer. Experience shows that many dealers are ignorant of this provision. Most of the dealers have still been taking financial year into account, which is not correct. For the purpose of this sub-section, every dealer must ascertain the cumulative total of the taxable turnover at the end of each month. If such figure crosses Rs. 10 lakhs in the preceding 3 months or Rs. 40 lakhs in the preceding 12 months, he must compulsorily apply for registration as a VAT dealer.

Sub-section (4) deals with the dealers whose taxable turnover during the period from 1-1-2004 to 31-12-2004 is more than Rs. 40 lakhs. Such dealers shall get themselves registered as VAT dealers. All such dealers must have got registered as VAT dealers even as on 1-4-2005. This sub-section requires the existing dealers under the APGST Act to get themselves registered as VAT dealers at the commencement of the Act.

Sub-section (5) is important , as it makes mandatory for the specified classes of dealers to get themselves registered as VAT dealers, irrespective of their taxable turnover. Without relevance to the threshold limits of either Rs. 10 lakhs or Rs. 40 lakhs mentioned in the earlier sub- Sections, if a dealer falls within any of the following clauses (a) to (h) of this sub-section, he must compulsorily get himself registered as a VAT dealer.

1. ‘Every dealer importing goods in the course of business from outside the territory of India.’ All dealers who import goods from foreign countries in the course of business must get themselves registered as VAT dealer. It must be noted that such import must be in the course of business.

2. ‘Every dealer registered or liable to be registered under the CST Act, 1956, or any dealer making purchases or sales in the course of inter State trade or commerce or dispatches any goods to a place outside the State otherwise than by way of sale.’ Under section 7(1) of the CST Act, every dealer liable to pay CST shall get himself registered as a dealer under that Act and such dealer is said to be liable to be registered. Such dealer and every dealer registered under the CST Act fall under this class. There may be cases where a dealer without having any registration under the CST Act may make either purchases or sales in the course of inter-State trade or may dispatch goods on transfer basis (branch transfer or consignment transfer) to other States. Even such dealers must also get themselves registered as VAT dealers.

3. ‘Every dealer residing outside the State but carrying on business within the State and not having any permanent place of business’. These are the dealers who have their business places in the other States but still do business in this State without any permanent place of business. These dealers should not be confused with ‘casual dealers’, who are not required to register as VAT dealers under sub-section (1) of section 17.

4. ‘Every dealer liable to pay tax on goods listed in Schedule VI.’ Schedule VI contains list of goods subjected to tax at special rates. They are, all liquors, petrol, aviation motor spirit, aviation turbine fuel and diesel oil. It may be noted that only when a dealer is liable to pay tax on the sale of these goods, he is liable for registration as a VAT dealer. If the dealer is a simple second seller exclusively in these goods like a petrol pump selling petrol and diesel, then there is no need for registration as a VAT dealer.

5. ‘Every commission agent, broker, del credere agent, auctioneer or any other mercantile agent by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of any non-resident principal’ Importance is to be given to the words ‘on behalf of any non resident principal’. Though the term ‘non resident principal’ has not been defined under the Act, it is generally understood by the authorities as a principal residing outside the State of Andhra Pradesh. Thus if the agent or broker or auctioneer, buys, sells, supplies or distributes goods on behalf of such principal, he is to get himself registered as a VAT dealer compulsorily.

6. ‘Every dealer availing sales tax deferment or sales tax holiday’. All the dealers availing these industrial incentives fall under this class. Sales Tax Holiday as such has not been in existence after 1-4-2005, but it must be noted that the provisions relating to registration contained in section 17 were given effect to from 31-1-2005 as per section 1(3)(a) of the Act. Hence the words ‘sales tax holiday’ find place in this clause.

7. ‘Every dealer executing works contract exceeding Rs. 5 lakhs for the State Government or local authority or every dealer opting to pay tax by way of composition on works contract.’ ‘Works Contract’ is defined in section 2 (45) of the Act. Where value of the contract awarded by State Government or Local authority exceeds Rs. 5 lakhs or where the contractor opts for composition, then there is compulsion to get registered as a VAT dealer. It may be seen that in the case of composition, there is no threshold limit (value). There are three types of composition in the case of works contracts, which may be seen at clauses (b), (c) and (d) of sub-section (7) of Section 4 of the Act.

8. ‘Every dealer liable to pay tax under sub- section (9) of section 4 of the Act’. Section 4 (9) provides for levy of tax in respect of a dealer running any restaurant, eating house, catering establishment, hotel, coffee shop, sweet shop or any establishment by whatever name called and any club which supplies food etc. Without relevance to the taxable turnover scored by them in any period, these dealers must get themselves registered as VAT dealer.

Sub-section (6) (a) deals with ‘voluntary registration’ as a VAT dealer. Any dealer effecting sale of taxable goods and who is not otherwise liable to get himself registered may also voluntarily apply for registration. However such registration shall be subject to the conditions prescribed.

Sub-section (6)(b) deals with ‘start up business’. Any dealer, who intends to effect sale of taxable goods and who is not otherwise required to be registered as a VAT dealer, may also opt for registration as a VAT dealer. This registration shall also be subject to the conditions prescribed.

Now let us see the provisions relating to registration as a TOT dealer:—

Every dealer, who is not registered or liable to be registered as a VAT dealer and who has a taxable turnover exceeding Rs. 5 lakhs in a period of 12 consecutive months or if a dealer has reason to believe that his taxable turnover in the said period will exceed Rs.5 lakhs must apply for registration as TOT dealer. Every dealer has to therefore see whether his taxable turnover in 12 consecutive months has exceeded Rs. 5 lakhs. A dealer should also apply for registration as a TOT dealer, if he has reason to believe that his taxable turnover in a period of 12 consecutive months will exceed Rs. 5 lakhs. This may be based on the estimate.

Sub-section (8) deals with deemed registration as a TOT dealer in the case of every dealer who held a registration certificate under the APGST Act, 1957, if he had a taxable turnover exceeding Rs. 5 lakhs but below Rs. 40 lakhs during the period from 1-1-2004 to 31-12-2004. and further if he has not discontinued the business or if his registration certificate has not been cancelled.

Sub-section (9) mandates that where a registered dealer dies or transfers or otherwise disposes of his business in whole, the successor or the transferee, unless already in possession of registration shall be liable to be registered under the Act. In the case of transfer or disposal, it must be whole of the business and not part.

Sub-section (10) requires that an application for registration shall be made to the prescribed authority in the prescribed manner and within the time prescribed.

Sub-section (11) mandates that if the prescribed authority is satisfied with the application furnished under sub-section (10), he shall register the applicant and grant him a certificate of registration in the prescribed form. The authority must be satisfied that the application is bonafide and is in order and in conformity with the provisions of the Act and the Rules made thereunder.

As per section 18(1)(a), the prescribed authority shall issue a registration identification number known as TIN (Taxpayer Identification Number) to a dealer registered as a VAT dealer. As per clause (b), in the case of TOT dealer, it is GRN (General Registration Number). Under sub-section (2), every VAT dealer or TOT dealer who is allotted TIN or GRN shall indicate such number on all returns, forms, tax invoices or any other documents used for the purposes of the Act.

Section 19 deals with cancellation and amendment of registration. Under sub-section (1) any VAT dealer or TOT dealer, who is registered shall apply for cancellation or amendment of registration in the prescribed circumstances. Sub- section (2) empowers the prescribed authority to cancel, modify or amend any certificate of registration issued for good and sufficient reasons. The proviso thereunder mandates that no order shall be passed under this sub-section, unless the dealer is given a reasonable opportunity of being heard.

There is no registration fee, unlike under the APGST Act for the purpose of registration either as VAT dealer or a TOT dealer. There is also no provision requiring the dealer to renew the registration every year. There is also no necessity to pay any security deposit for obtaining the registration certificate.

So far, we have seen the various provisions concerning the registration of a dealer in the APVAT Act, 2005. Let us now see what the APVAT Rules, 2005 (in short Rules) speak about the registration of a dealer.

As per entry No. 1 in the table under Rule 59(1) of the Rules, the Commercial Tax Officer (in short CTO) of the circle concerned is the prescribed registering authority to issue, amend and cancel the registration of a VAT dealer. As per entry No. 2, the Assistant Commercial Tax Officer (in short ACTO) of the Circle, authorized by the CTO of the Circle is the prescribed registering authority to issue, amend and cancel the registration of a TOT dealer. The ‘concerned Circle’ is to be identified with reference to the Place of business as defined in section 2(23) of the Act. It means any place where a dealer purchases or sells goods and includes godown etc. Under Rule 4 (5) of the Rules, if a dealer has more than one place of business in the State; i.e., branches he shall make a single application in respect of all such places specifying therein, one of such places as place of business for the purpose of registration and submit it to the authority prescribed. For example, a dealer has places of business in Hyderabad, Warangal, Kurnool, Vijayawada and Tirupati. He has to specify one of these as the place of business for the purpose of registration. If such dealer specifies, say Tirupati as his place of business for registration, he has to submit the application for registration to the concerned CTO in Tirupati. It is sufficient, if a single application is submitted in respect of all places of business.

Under Rule 4 (1), every dealer liable or who opts to be registered under sub-sections (2) to (6) to section 17 shall submit an application for VAT registration in Form VAT 100 to the authority prescribed (in fact optional or voluntary registration is available only under sub-section (6) of section 17 and not under other sub-sections). Under sub-Rule (4), of Rule 4, every dealer, who is allotted a Taxpayer Identification Number (TIN) under Rule 28 of APGST Rules as on 31-3-2005 shall be deemed to be registered as a VAT dealer, if he is required to register as a VAT dealer under the provisions of the Act. This means, even if a TIN is allotted as on 31-3-2005, then he cannot be a VAT dealer under the provisions of VAT Act, if he is not required to get himself registered as a VAT dealer under the provisions of VAT Act.

Under Rule 4(2), every dealer not registered or not liable to be registered for VAT but liable to be registered under section 17(7) of the Act shall submit an application for TOT registration in Form TOT 001 to the authority prescribed. Under sub- Rule (3), every dealer registered under the APGST Act, whose taxable turnover exceeds Rs. 5 lakhs for the period from 1-1-2004 to 31-12-2004, who is neither required to be registered for VAT nor opted to be registered for VAT shall be deemed to be registered as a TOT dealer.

Section 17(5)(c) makes it compulsory for every dealer residing outside the State but carrying on business in this State and not having any permanent place of business to get himself registered as a VAT dealer. Under Rule 4(6) such dealer shall authorise in writing on Form VAT 129 a person residing in this State, who shall be responsible for all the legal obligations of the dealer under the Act. Under this authorization, the person authorized has to conduct business on behalf of the dealer, as per the provisions of the Act. The authorized person should also sign accepting the said responsibility.

Two new concepts in the VAT law are ‘time to apply for registration’ and ‘effective date of registration’. Rule 5 and the table thereunder sets out various dates for applying for registration as a VAT/TOT dealer. Rule 6 deals with effective date of registration (in short EDR).

Rule 5(1)(a):— Every dealer commencing business and whose estimated taxable turnover for 12 consecutive months is more than Rs.40 lakhs (falling under section 17(2) shall apply for registration not later than 15 days but not earlier than 45 days prior to the anticipated date of the first taxable sale. This is applicable to a new dealer commencing business. Example:— Expected date of taxable sale is 20-7-2005. Time to apply for VAT registration is between 5-6-2005 and 5-7-2005. In respect of this dealer, as per Rule 6(1)(a), the EDR is the first day of the month during which the first taxable sale is declared to be made. In the above example, the declared date of taxable sale is 20.7.2005 and hence, EDR is 1-7-2005.

Rule 5(1)(b):— Every dealer whose taxable turnover in the preceding 3 months exceeds Rs. 10 lakhs or in the 12 preceding months exceeds Rs. 40 lakhs (falling under section 17(3) shall apply for registration by the 15th of the month subsequent to the month in which the liability to register for VAT arose. This is applicable to already registered TOT dealer or unregistered dealer, who is doing business. This dealer has to review his taxable turnover for the preceding 3 months at the end of each month and ascertain whether it has crossed Rs. 10 lakhs. Should also review and ascertain at the end of 12 consecutive months whether it has crossed Rs. 40 lakhs. Example:— By August, 2005, the taxable turnover has crossed Rs. 10 lakhs in the preceding 3 months. He has to then apply by 15-9-2005. In respect of this dealer, as per Rule 6(1) (b), the EDR is the first day of the month subsequent to the month in which the requirement to apply for registration arose. In the above example, the liability for registration arose on 31-8-2005. Say, the dealer has applied for registration on 11-9-2005. The EDR is 1-10-2005.

Dealers registered under the APGST Act (falling under section 17(4) and who are allotted TIN need not apply for fresh VAT registration, as they are deemed to have been registered for VAT with effect from 1-4-2005 (EDR) under Rule 6(1)(c).

Rule 5(1)(c)(i):— Every dealer not registered or not liable for registration as a VAT dealer and who estimates his taxable turnover to exceed Rs. 5 lakhs in the next 12 consecutive months (falling under section 17(7) must apply for registration as TOT dealer within 15 days prior to commencement of business. This is applicable to new business. Example:— Expected date of commencement of business is 20-8-2005. He has toapply on or before 5-8-2005. In respect of this dealer, under Rule 6(2) (a), the EDR is the first day of the month during which business is commenced. Business is commenced in the example on 20-8-2005. The EDR is 1.8.2005.

Rule 5(1)(c)(ii):— Every dealer, who is required to register under section 17(7) and whose taxable turnover for the preceding 12 months has exceeded Rs. 5 lakhs shall apply for registration as a TOT dealer by the 15th of the month subsequent to the month in which the taxable turnover exceeded Rs. 5 lakhs. This is applicable to existing business which is neither registered for VAT nor for TOT. Example:— Taxable turnover in the preceding 12 months exceeded Rs.5 lakhs by 31-7-2005. He has to apply for TOT registration by 15-8-2005. For this purpose, this dealer has to review the taxable turnover for the preceding 12 months at the end of each month. In respect of this dealer, under Rule 6(2)(b), the EDR is the first day of the month subsequent to the month in which the obligation to apply for general registration arose. In the example given, taxable turnover of Rs.5 lakhs exceeded by 31-7-2005. He has to apply by 15-8-2005. Then his EDR would be 1-9-2005.

Rule 5(2):— Every dealer who is required to register under section 17(5) shall apply for registration 15 days prior to the anticipated date of first taxable sale but not earlier than 45 days prior to the anticipated date of first taxable sale unless an application is made under sub-rule (4). These are the dealers who are to take VAT registration compulsorily like having inter state transactions, irrespective of their taxable turnover. Example:- Expected date of first taxable sale is 20-8-2005. He has to apply for VAT registration between 5-7-2005 and 5-8-2005. In respect of this dealer, under Rule 6(1)(d), the EDR is the first day of the month in which the dealer has applied for VAT registration. In the example given, say the dealer has applied for registration on 5-8-2005. Then his EDR would be 1-8-2005.

Rule 5(3):— Any dealer effecting sales of goods liable to tax under the Act may apply to register under section 17(6)(a) and such registration shall be subject to the conditions prescribed in Rule 8. These are the dealers who apply for voluntary registration. All the conditions specified in Rule 8 shall apply to this case. Such conditions are that he should have bank account, remain registered for 24 months from EDR etc. Since it is a voluntary registration, dealers can apply as and when they desire to have VAT registration. For this dealer, under Rule 6(1)(e), the EDR is from the first day of the month following the month in which application for registration is made on or before the 15th of the month. If he applies for VAT registration on 10-8-2005, the EDR is 1-9-2005. Alternatively, the EDR is from the first day of the month following the months subsequent to the month in which application for registration is made after 15th of the month. If he applies for VAT registration on 30-8-2005, the EDR is
1-10-2005.

Rule 5(4):— Any dealer intending to effect sales of goods liable to tax under the Act may apply to register under section 17(6)(b) and such registration shall be subject to the conditions prescribed in Rule 9. These are applicable to ‘start up business’ (new business) cases. The conditions specified in Rule 9 shall apply. They are that the registration will be only for a period of 24 months prior to making taxable sales, that he can claim input tax credit only for a maximum period of 24 months etc. Since it is a new business, there is no time limit for applying for registration. A dealer setting up a factory and anticipating first taxable sale after, say, 20 months can apply any time. For this dealer, under Rule 6(1)(f), the EDR is from the first day of the month in which the dealer, has applied for registration. If he applies for VAT registration on 3-9-2005, the EDR is 1-9-2005.

Under section 17(8) read with Rule 4(3), in the case of dealers registered under the APGST Act, 1957 and had taxable turnover exceeding Rs. 5 lakhs but below Rs. 40 lakhs for the period from 1-1-2004 to 31-12-2004, there is no need to apply for fresh TOT registration. They are deemed to be registered for TOT.

EDR for belated applications:—

Rule 7 specified separate EDR in respect of the applications submitted for registration after the time limit prescribed in Rule 5. In such cases the EDR shall be as follows:-

Rules 7(1)(a)(b) and (c):— In the case of new dealers commencing business and liable for VAT or TOT registration and dealers liable for VAT registration irrespective of taxable turnover, where there is delay in the submission of application, the EDR is as follows:—

1. The EDR will be first day of the subsequent month, where the application or detection is in the month in which the application is due. Date of first taxable sale is shown as 20-7-2005 and applied for VAT/TOT registration on 31-7-2005. The EDR is 1-8-2005.

2. The EDR will be first day of the month, where application or detection was made in the subsequent month following the month it was due. Date of taxable sale is 20-7-2005 and applied for VAT/TOT registration on 16-8-2005. The EDR is 1-8-2005.

3. The EDR will be first day of the month of application or detection, where the application or detection was made in the months subsequent to those months mentioned above. Date of first taxable sale is 20-7-2005. Applied for registration as VAT/TOT dealer on 15-10-2005. The EDR is 1-10-2005.

In the case of submission of belated application for registration for VAT or TOT by the existing dealers exceeding registration threshold, the EDR is as follows:—

1. The EDR will be first day of the subsequent month in which application or detection in the month in which the application was due. Liability for VAT/TOT arose on 31-8-2005. Applied for registration on 25-9-2005. The EDR is 1-10-2005.

2. The EDR will be first day of the month in which the application is received. Liability for VAT/TOT arose on 31-8-2005. Applied for registration on 10-10-2005. The EDR is 1-10-2005.

3. The EDR will be first day of the month in which application or detection was made. Liability for VAT/TOT arose on 31-8-2005. Applied for registration on 19-12-2005. The EDR is 1-12-2005.

Rule 8 speaks of Voluntary Registration. A VAT dealer who obtains this registration has to fulfill all the requirements in this Rule. If he fails to file timely tax returns and fails to pay any tax due and his taxable turnover remains under the limits specified in Sections 17(3) and (2), his registration is liable for cancellation under Rule 8(3). However he is entitled for a notice before cancellation.

Rule 9 speaks of ‘Start up business’. A dealer intending to set up a business in taxable goods who does not anticipate making first taxable sale within the next 3 months and applying for VAT registration shall be treated as a start up business vide sub-Rule (1). He has to apply in form VAT 104 in addition to Form VAT 100 vide sub-Rule (2). There are in all 8 sub-Rules, which may be verified for various conditions attached for registration under this head.

Under Rule 10, the prescribed authority has to issue Registration certificate to a VAT dealer on Form VAT 105, in the case of a Start up business a notice in Form VAT 106, in addition to Form VAT 105 and in the case of a TOT dealer an RC on Form TOT 003.

There is one more new feature. Where a dealer fails to get himself registered as a TOT or VAT dealer, under Rule 11(1), the prescribed authority may register such dealer, after issuing a notice. Certificate is issued on Form VAT 111 or TOT 005, as the case may be. Sub-Rule (2) empowers the said authority to refuse to issue any registration after giving opportunity to the applicant.

As per Rule 12(1), Certificate of registration shall be displayed in a conspicuous place at the place of business, including all other places of business in the State. Registration certificate shall not be transferred (sub-rule 2) If the Registration certificate is lost, a duplicate shall be obtained from the said authority as per sub-rule (3).

If there are any changes in the registration such as changes in the address, business activities, bank accounts etc., it has to be informed in Form VAT 112 or TOT 051, as the case may be as per Rule 13(1). If there is change in the status of business, fresh registration has to be taken. For example, if a proprietorship becomes partnership, fresh RC has to be taken. Sub-rule (3) allows change of place of business from the jurisdiction of one authority to the jurisdiction of another authority and an application has to be made in From VAT 112 or TOT 051 as the case may be.

As per Rule 14(1), an application for cancellation of registration has to be made within 14 days of closure of business. A VAT dealer may apply for cancellation in Form VAT 121, if his taxable turnover did not exceed Rs. 10 lakhs during the most recent period of 3 consecutive calendar months and Rs. 30 lakhs for the previous 12 consecutive calendar months. A dealer who has taken voluntary VAT registration under section 17 (6)(a) shall apply for cancellation only after the expiration of 24 months.

Under Rule 14(4), every VAT dealer whose registration is cancelled under Rule 14 shall pay back ITC availed in respect of all taxable goods on hand on the date of cancellation. But in respect of transfer of business to another VAT dealer, he need not repay the ITC availed on capital goods. Otherwise, ITC on capital goods has to be calculated based on the book value of such goods on that date.

The authority has to inform the cancellation on Form VAT 124 as per Rule 14(5). Even without any application for cancellation, the authority can cancel the VAT registration under sub-Rule (6), if the dealer is not entitled for registration. If the authority chooses to reject the application for cancellation, he has to intimate the same on Form VAT 123 within 14 days of receipt of Form VAT 121 vide sub-Rule (7). In the case of compulsory cancellation, a notice on Form VAT 125 has to be issued before hand under sub-Rule (8). The authority, under sub-Rule (9), may cancel the registration of a VAT dealer, who has taken voluntary registration under section 17(6), if he has no fixed place of business, or has not maintained proper books of account or has not furnished correct and complete returns. Unless otherwise specified, cancellation takes effect from the end of the tax period in which the registration is cancelled as per sub-Rule (10).