This for elaborating your query.
You should create VAT account on the liability side. As soon as purchase invoice is booked, posting of VAT will be made on the expense side. Since you are not getting any set-off, it should be booked under expenses right-away.
The process of applying taxes on transaction will be just the same. Only that VAT account in your ERPNext account will be created on the Expense side, and not on the liability side.