9.3. Types of Dealers
There are two types of Dealers.
- Registered Dealers
- Unregistered Dealers
A dealer whose gross annual turnover is above the VAT threshold limit is required to register under VAT. This is mandatory. A new dealer will be allowed 30 days time from the date of liability to get registered.
A VAT registered dealer will be eligible for input tax credit. All Registered Dealers must follow the VAT law, irrespective of the size of the business. A Registered Dealer may sell to both Consumers and Non- Consumers.
A registered dealer can opt for compositions scheme.
A dealer whose annual turnover is less than Rs.5 lakhs is an Unregistered Dealer and has been granted the status of a Consumer. So, the VAT paid by an Unregistered Dealer is treated as his cost and is charged no further VAT on his sale. It is assumed that such small dealers will not be supplying other industries or dealers. Therefore they are not included into the VAT chain.
But if the small dealer is in the business of actually supplying to others besides consumers, then he can optionally choose to register and gain the benefits of a Registered Dealer.
The registered dealer pays VAT on goods purchased from unregistered dealer.