Role of Treasury on 'VAT' collection

Lairenlakpam Binod *

The VAT (value added Tax) is basically a state subject derived from entry 54 of the state list and the centre is playing a role of facilitator for successful implementation of VAT. The VAT is a multipoint destination based taxation system with provision to allow input tax credit appropriation against tax liability at the subsequent sale. It is applied on each stage of transaction in production and distribution chain. The VAT is a tax on the final consumption of goods or service and ultimately borne by the consumers.

The VAT is introduced in place of sales tax w.e.f 1st April 2005 in various states across India. It safe guard against double taxation and multiplicity of taxes and decrease tax burden of input and output sales tax. The VAT is levied only on movable goods. The prevailing rate of VAT is 0% for essential commodities, 1% on bullion and precious stone, 4% on industrial inputs and capital goods and items of mass consumption, all other remaining goods are 12.5% ( lists of categorised rate of VAT are available with the respective state government).The rate may be varies from state to state but rate on commodities are uniform throughout the country.

The VAT is state government revenue to meet annual non plan expenditure; The Taxation office under the Revenue department of the state government is carrying out the responsibility of levying and collecting VAT.

When the responsibilities of VAT collection rest with the Taxation department then how the Treasury could be responsible to it? Here I need to mention that the Treasury is indirectly responsible to the efficient collection of VAT, though not involved directly.

The Treasury is categorised as Banking and non Banking Treasury, where the cash business of the Treasury is conducted by the nationalised Banks the Treasury is known as Banking Treasury and in the remote places where there are no nationalised Banks the cash business of which is not conducted by Bank it is known as non Banking Treasury. The non Banking Treasury held the currency chest having in strong room for receipt and disbursement of government money.

The Treasury Officer who is the head of the office is responsible for efficient function of treasury works in strict compliance with Central Treasury Rules which is also followed by the state government. The duty of the Treasury Officer is to receipt of money in favour of government through challans and payment of bills of government departments under its jurisdiction.

He not only verifies the bills submitted to him by the Drawing & Disbursement Officers under its jurisdiction for payments but also receive money tendered in favour of the government. He can object to any bills if it is not prepared in accordance with the Rules or that if the bill is of suspicious nature in his opinion. He is responsible for verifying and certifying of monthly cash balance and submission of monthly state financial transactions (monthly accounts) to the state Accountants General through its monthly cash accounts and list of payments.

Actions in the Treasury to verify different kind of contingent bills submitted by various Drawing & Disbursing officers varies from bill to bill. My article relate to only contingent bills which charges VAT

The VAT is not only collected through the contingent bills of government department but also remitted in to the treasury through challans tendered by various government departments and registered dealers, traders etc.

The Treasury while passing a contingent bills of fully vouched nature presented by a Disbursing officer for the purchase of 'stores' required for the public service for various purpose which includes stationery, furniture, machinery, computer items, tools and plant etc, verify and perform some preliminary checks like the form in which it is prepared whether it is in appropriate form, correct the arithmetical inaccuracy, the bill amount is within available appropriation, verify the related sub vouchers such as cash memos of articles/goods purchased (excepting some local purchase of petty articles), copies of sanctioned order(s) of the sanctioning authority duly certified by a gazetted officer of responsible including duly consent copy of the Finance Department and above all the VAT deduction.

In the case of contingent bills which includes charges on account of purchase of goods on which VAT has been charged the treasury before passing the bill for payment verify that the VAT at the applicable rate is charged on the bill and is supported by the following certificate duly signed by the disbursing officer, "certified that in case of sub vouchers attached to the bill and those retained by my office relating to the purchase of goods on which VAT have been charged , the goods have not been exempted under the act or the Rules made there under and that the amount paid on account of VAT on those goods are correct under the provision of that act or the rules made there under and that in case of supplies against regular contracts, the relevant contract include a specific provision that VAT is payable by government." (Rule 293-B)

In the case of bills presented to the treasury in support of payment for purchase of stores, the treasury, before it is passed for payment verify that the bill is accompanied by a certificate that "the articles detailed in the vouchers and their quantities are correct, their quality good and according to specifications, the rate paid are not in excess of accepted market rates, and that suitable notes have been made in the indents and invoices to prevent double payment, and necessary entries made in the stock register at page..". The authority under which the purchase is made has also been quoted. The VAT is also charged at the applicable rate against the bill if not already charged.

If found everything are in order on verification to the satisfaction of the Treasury the contingent bill is passed finally for payment.

The Treasury in having passed a contingent bill which charges VAT at the applicable rate has thus earned a credit to its wing a feather as it has assisted in contributing some money to the government account through indirect way. Passing and payment of VAT chargeable contingent bills without charging is nothing other than blocking a road to nation's development.

As a general rule, payment for supplies is not permissible unless the stores have been received and survived, payment prior to verification of quality and quantity in exceptional case may be permitted provided adequate safe guard exist to secure the government against losses, in such cases the Drawing and Disbursing Officers prepared their contingent bills in abstract in form T.R.31 giving full description of the charges and number and date of sanction permitting advance payment.

The Treasury in passing such abstract bills verify that, the abstract bill is supported by sanction copies or mentioning its sanction dated order number on the body of the bill permitting to draw money in advance clearly indicating the purpose for which money is required and necessary certificates duly signed by the disbursing officer, that the detailed contingent bills have been submitted to the controlling officer in respect of abstract bills drawn more than a month before this bill.

The VAT is deductable at source but in case of abstract contingent bills passed and paid in lump sum, VAT is not calculated and charged on the bill. In such cases while submitting the detail bill in form T.R.30 along with relevant sub vouchers quoting the voucher number and date of the abstract bill, to the Accountant General, the disbursing officer show in the detail bill the amount of VAT charged against the abstract bill drawn and necessary copies of challans in token of remittance of VAT amount in to the treasury are attached to the detail bills.

In this context, while passing and payment of such abstract bills the Treasury noted in a appropriate register the detail of the abstract bill of which the VAT is due to the government and reconcile with the subsequent remittance of VAT remitted through challans. This register serve the purpose of watching not only the remittance of VAT in question but also to confirm of transit of the detail bills to the Accountant General against the abstract bills even though the Treasury has no direct responsible for submission of detail bills by the concerned disbursing officer who had drawn the abstract bills.

The VAT is also subject to chargeable against the work expenditure connected with the petty construction, repair and maintenance of buildings and other works of public utility. Whether the bills are of fully vouched or of abstract in nature the passing and payment of such bills in the treasury, the procedure is same as in the case of purchase of stores mentioned in the above Para only exception in the case of contractors bill paid by cheque without the intervention of the treasury. The transmission to the Accountant General of the detail bills and the sub vouchers against the abstract bill drawn for the purpose shall never be delayed for more than a month.

The Sub-vouchers which are required to be sent to the Accountant General should not be cancelled either by the drawing officer or by the controlling officer, as the duty of cancelling these sub-vouchers and keeping in proper custody to prevent their fraudulent use devolves on the Accountant General. {Rule 297)

The conduct of Treasury works / business is inspected by the Comptroller & Auditor General of India through its Accountants General once in a year and the inspection reports are placed before the state government through its Finance Department.