We have just launched an e-commerce website and we have been told that we need to get the sales tax registration done.
It is under a proprietorship firm and not a Pvt Ltd company.
We were told that we need to charge VAT registration done. We got that done from the Delhi Sales Tax office and got the authoirty to charge VAT on every transaction @12.5%
Got to know later that we don’t need to charge the VAT right from the first transaction itself..There is indeed a threshold limit of Rs. 10lakhs after which the Sales tax becomes mandatory. So I could have waited for the Sales tax registeration.
Now my problem is–
On every Rs. 1000/- product the customer has to pay a tax of Rs125/- ( the VAT charges are 12.5%)
So the total price which is paid by the customer for the product on the website becomes expensive if the sales tax of 12.5% is included. (Like for Rs.1000 product, he is paying 1125)
What do you suggest.. Should I get the Sales tax cancelled as I will take about 1-1.5years to reach the threshold limit of Rs. 10lakhs ?
Please advice.
Thanks so much
Marshall Sarkhedi
Hey Aparna,
Marshall here. I am practising Chartered Accountant in Gujarat.
For your Kind information, For VAT Purpose, Everyone have to compulsory register themselves with VAT Department in any year in which Sales cross the Threshold limit (there in Delhi ; Rs. 10 Lacs) ; Till then u can enjoy your sales without register yourself with the Department.
Here in your case, Everyyear your sales figure will be considered, any time you cross your limit ; then you will have to register for VAT.
So, you need not to take VAT Number now, you can take it later when it crosses threshold limit.
For example,
Year 2013 – Sales Rs. 8.90 Lacs
Year 2014 – Sales Rs. 9.60 Lacs
Year 2015 – Sales Rs. 10.2 Lacs ( So in year 2015 when your sales crosses this limit of Rs. 10 Lacs within 30 days you have to register yourself with VAT Department.)
So, my advice is to Surrender your current VAT Number and wait till you get into scheme forcefully.
Aparna Taneja
Thanks a lot Marshall. I already had got a Sales tax registeration done without knowing about the threshold limit. Was misguided 🙁
Will get it cancelled now as don’t want to get into the loop of tax audits.