Sales Tax Instructions

Sales Tax Instructions, 2009
1. Obtain the relevant copy of sales invoices and check prices charged with
independent evidence, such as price lists, tenders etc.
2. Test a number of items with stock records, delivery challan and gate passes to
ensure correct declaration of deduction from stock.
GENERAL:
Dealings with associated companies be checked with reference to under pricing, transfer
of stock and material on low prices etc.
The cash book and bank statements of the relevant tax period of the registered persons be
analyzed and reconciled with the quantum (value) of Sales indicated in the tax returns.
Check that debit notes have proper supporting documents e.g. copy of goods received
notes. Check all credit notes and postings to sales ledger.
In order to verify the value of sales, compare the value addition made on the cost of
goods sold with that of the previous period and if the value addition has a material
variation, the reasons therefore must be established and verified.
Check whether the registered person had paid sales tax on:-
Supply of scarp/wastage; and
Sale of Plant & Machinery and other moveable properties not specifically exempted
under the Sales Tax Act, 1990.
Check whether on advances (if any) received for taxable supplies as per section 2(44) of
the Act, was deposited in the Govt. treasury and accounted for in the return relating to the
relevant tax period.
VALUE ADDITION:
The value addition may be handled as follows:-
In case of importer:
Total cost of goods (including all taxes excluding sales tax) plus transport costs should be
compared with selling prices. The difference may be related to total landed cost that
equals value addition % on cost. This may be judged as being reasonable and acceptable.
In case of wholesaler:
Total cost of goods bought plus transport costs/packing costs, if applicable, be compared
to selling price and difference as a % may be related to cost and then % value addition
may be examined for its appropriateness in the business concerned.
In case of manufacturer: