If a person is in business, as soon as the turnover of his taxable supplies exceeds the prescribed limit, he becomes a taxable person. However, if he is engaged in a specified business or profession, he is a taxable person irrespective of the turnover of his taxable supplies.
As a taxable person, he is required to be registered for VAT.
Once a person is registered for VAT, he charges VAT on all the taxable supplies made to his customers. This is his output tax. Similarly, the VAT registered person will be charged VAT on the taxable goods and services supplied to him by his VAT registered suppliers. This is his input tax.
Every quarter (or every month in case his annual turnover of taxable supplies exceeds Rs 10 million) the VAT registered person fills in a VAT return in which he substracts the input tax allowable from the output tax and pays the balance to the MRA. If the input tax is more than the output tax, the excess may be carried forward as a credit to his next return or may be repaid in certain circumstances.