Value Added Tax

1. VALUE ADDED TAX (VAT) Powered Byhttp://www.taxqueries.in/

2. CONTENTS • VAT Introduction • Features of VAT • Advantages of VAT • Goods on which VAT does not apply • Reverse Charge Powered By http://www.taxqueries.in/

3. VAT INTRODUCATION • Value Added Tax collection is a process of levying certain charges on goods, services and transaction by a governing authority to provide the public services.  • It is one of the leading powers held by the government of India. • Different types of taxes are applicable at various stages of the sale of goods and services VAT is one such tax Powered By http://www.taxqueries.in/

4. VALUE ADDED TAX • VAT is a kind of tax which levied on the sale of goods and services when these goods are ultimately sold to the consumer. • VAT Tax is an integral part of the GDP (Gross Domestic Product) of any country. • VAT is imposed on intrastate sale that is the sale of goods within the state. VAT is a tax on value addition on the goods. Powered By http://www.taxqueries.in/

5. While Value Added Tax is levied on the sale of goods, services paid by manufacturers to the government, the actual tax is levied on end users who purchase these goods. • Hence, VAT is an indirect tax which is given to the government by consumers but via manufacturers of goods and services. • It is a multi-stage tax which is levied at each step of production of goods and services which involve sale/purchase. Powered By http://www.taxqueries.in/

6. FEATURES OF VAT • The Homogeneous (similar) goods and services are taxed uniformly. So the similar product from all brands will be taxed the same. • Value Added Tax reduces chances of tax evasion and support compliance. • VAT is levied at each stage of production of a good to makes the taxation process easier and more transparent. • Encourages transparency in the sale of goods and services at the small-scale level. • VAT avoids Cascading Effect of Tax. Powered By http://www.taxqueries.in/

7. ADVANTAGES OF VAT • It becomes easier to give tax concessions to goods used by the common man or products used for the manufacture of capital assets or exported goods. • Exports can be freed from domestic trade taxes. • It provides an instrument of taxing consumption of goods and services. • Interference in market forces is minimum. • Simplicity and transparency. • Tax rates can be lower as the tax is levied on the retail price and not at the wholesale price. Powered By http://www.taxqueries.in/

8. GOODS ON WHICH VAT DOES NOT APPLY • VAT does not apply to the products where price is determined by the government intervention such goods as follows. • Petrol, Diesel or other motor spirits. • Liquor. • Lottery Tickets. Powered By http://www.taxqueries.in/

9. REVERSE CHARGE • Normally, VAT is payable by the seller of goods. • However, in some cases, the liability is cast on the purchaser of goods, known as ‘Reverse charge.’ • In reverse charge, the service receiver also acts as the service provider. He pays tax on services received by him. He can avail Cenvat credit of tax paid by him since the service is his ‘input service’. • There is a provision of ‘tax collection at source’ under section 206C of Income Tax Act. Here, the manufacturer or seller of liquor is liable to pay tax at source. Powered By http://www.taxqueries.in/

10. CALCULATION OF VAT • Value Added Tax is calculated as the difference between input tax (Purchase Price) and output tax(Sale Price). •  VAT is known as the tax on value added, or VAT Tax as it is imposed on the amount of value addition made.  VAT = Sale Price – Purchase Price. Powered By http://www.taxqueries.in/

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