At the end of every tax period it is advisable to set off the output vat amount of output vat ledgers with Input VAT amount of input VAT ledgers created.
Where the net output is in excess, the balance amount of VAT due is transferred to VAT Payable ledger. For any tax period, if the input tax is in excess of output VAT, then input VAT has to be adjusted to the extent of output VAT liability and the balance of Input Tax Credit can remain in the respective ledgers.
To create a journal voucher for adjusting the output VAT against input VAT,
Go to Gateway of Tally > Accounting Vouchers > F7: Journal > Select Not Applicable from the Voucher Class List.
Select the required Output VAT, Purchase Tax and CST ledgers to be debited from the List of Ledger Accounts and enter the corresponding ledger balance amount for the given period in the Debit field. These ledgers are to be debited for adjusting the total output vat (for each rate) against input vat ledgers.
Note: Only in Karnataka VAT enabled Company, the output VAT, Purchase tax and CST ledgers are to be selected to set-off the dues against input tax credit as the VAT return acts as VAT and CST return. For other states, only the output VAT and purchase tax ledgers need to be selected.
Credit the Input VAT ledgers and enter the amount that has to be set-off against the output vat, purchase tax and CST ledgers that are debited.
In case the aggregate of input vat ledgers is less than the debit values of output VAT values debited, transfer the balance amount to VAT Payable ledger by selecting it in the credit field. VAT Payable ledger can be grouped under Current Liabilities or Duties & Taxes with Type of Duty/Tax as Others orCurrent Liabilities.
In case where the input VAT value is more than the output VAT, use the excess amount to the extent required for set-off. Here the additional ledger like VAT payable need not be used.
Accept the voucher and then make a payment entry for the payable amount if any.