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Security for registration

The act may prescribe the authority for the proper payment of the tax, from time to time demand from a registered dealer or from a dealer who has applied for registration under this Act, reasonable security not exceeding an amount to be paid in a manner suggested in the Act.

The prescribed authority as per the state VAT Act may by order forfeit the whole or any portion of the security furnished by a dealer:

  1. for collecting any amount of tax, interest or penalty that is payable by such dealer, or
  2. if such dealer is found to have misused any prescribed certificate or declaration or has failed to keep or retain them in the prescribed manner.

(3) No order shall be passed under sub-section (2), without giving the dealer an opportunity of showing cause in writing against such forfeiture.

VAT rates and the commodities

The VAT covers about 550 goods and only two basic VAT rates of 4% and 12.5%, plus a specific category of tax-exempted goods and a special VAT rate of 1% only for gold and silver ornaments, etc. are applicable. 

The uniform VAT rate will abolish the multiplicity of rates in the existing structure. Under the exempted category, there will be about 46 commodities comprising of natural and unprocessed products in unorganized sector, items which are legally barred from taxation and items which have social implications. Included in this exempted category is a set of maximum of 10 commodities flexibly chosen by individual States from a list of goods (finalized by the Empowered Committee) which are of local social importance for the individual States without having any inter-state implication. The rest of the commodities in the list will be common for all the States.

A VAT rate of 4% is applicable to the largest number of goods ( about 270 ), common for all the States, comprising of items of basic necessities such as medicines and drugs, all agricultural and industrial inputs, capital goods and declared goods.

The remaining commodities, common for all the States, will fall under the general VAT rate of 12.5%. In terms of decision of the Empowered Committee, items relating to sugar, textile and tobacco, because of initial organizational difficulties, will not be imposed for one year after the introduction of VAT, and till then the existing arrangement will continue.

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