A VAT dealer refers to a person or business entity that is registered under the Value Added Tax (VAT) system and is authorized to collect VAT on the sale of goods. Although VAT has largely been replaced by the Goods and Services Tax (GST) since July 1, 2017, some Indian states still apply VAT for specific items such as petroleum products, alcoholic liquor for human consumption, and certain local goods. A VAT dealer is required to file periodic returns, maintain proper records, and remit the collected tax to the government. These dealers typically operate within state jurisdictions, and their eligibility or threshold limits for VAT registration may vary from one state to another.
Under Indian Tax Law, especially as governed by state-specific VAT Acts, the definition and obligations of a VAT dealer are outlined clearly. For instance, under Section 2(28) of the Andhra Pradesh VAT Act, 2005, a “dealer” means any person who carries on the business of buying, selling, supplying, or distributing goods. Similarly, Section 4 mandates that every dealer exceeding the turnover threshold must register under the Act and collect tax as applicable. Additionally, Section 20 discusses the filing of returns and payment of taxes. Non-compliance can lead to penalties as per Section 51, including interest and fines.
Despite the national shift to GST, understanding the concept of VAT dealer is crucial for businesses dealing with non-GST commodities, or operating in union territories or border states with dual tax systems. Dealers must still obtain VAT registration from the respective State Commercial Tax Departments and comply with local laws. Proper invoicing, record-keeping, and return filing remain mandatory practices.
🧠 Mnemonic to Remember: “D-E-A-L-E-R”
- D – Definition under Section 2(28) (Who is a dealer?)
- E – Eligibility for VAT registration (Turnover thresholds)
- A – Applicable goods (alcohol, petroleum, etc.)
- L – Local Laws vary by state
- E – Entry of tax through sales and purchases
- R – Returns filed as per Section 20
