Advantages of VAT In the advantages part we will first look after the broad coverage of VAT in the Indian

market. Then we will consider the level of security the Indian VAT is having on our revenues. Obviously the selection of items to be covered by VAT in India will be given a bullet to think upon and at last we will check out the co-ordination VAT in India will be having with our existing direct tax system. 1) Coverage If the tax is carried through the retail level, it offers all the economic advantages of a tax that includes the entire retail price within its scope, at the same time the direct payment of the tax is spread out and over a large number of firms instead of being concentrated on particular groups, such as wholesalers or retailers. If retailers do evade, tax will be lost only on their margins because customers that are registered firms gain nothing if their suppliers fail to collect tax, except delay in payment; they will pay more to the government themselves. Under other forms of sales tax, both seller and customer gain by evading tax. One particular advantage is that of the widening of the tax base by bringing all transactions into the tax net. Specifically, VAT gives the new government the opportunity to bring back into the tax system all those persons and entities who were given tax exemptions in one form or another by the previous regime. 2) Revenue security VAT represents an important instrument against tax evasion and is superior to a business tax or a sales tax from the point of view of revenue security for three reasons. In the first place, under VAT it is only buyers at the final stage who have an interest in undervaluing their purchases, since the deduction system ensures that buyers at earlier stages will be refunded the taxes on their purchases. Therefore, tax losses due to undervaluation should be limited to the value added at the last stage. Under a retail sales tax, on the other hand, retailer and consumer have a mutual interest in underdeclaring the actual purchase price. Secondly, under VAT, if payment of tax is successfully avoided at one stage nothing will be lost if it is picked up at a later stage; and even if it is not picked up subsequently, the government will at least have collected the VAT paid at stages previous to that at which the tax was avoided; while if evasion takes place at the final stage the state will lose only the tax on the value added at that point. If evasion takes place under a sales tax, on the other hand, all the taxes due on the product are lost to the government. A significant advantage of the value added form in any country is the cross-audit feature. Tax charged by one firm is reported as a deduction by the firms buying from it. Only on the final sale to the consumer is there no possibility of cross audit. Cross audit is possible with any form of sales tax, but the tax-credit feature emphasises and simplifies it and is likely to make firms more careful not to evade because they know of the

possibility of cross check. 3) Selectivity VAT may be selectively applied to specific goods or business entities. We have already addressed essential goods and small business. In addition the VAT does not burden capital goods because the consumption-type VAT provides a full credit for the tax included in purchases of capital goods. The credit does not subsidize the purchase of capital goods; it simply eliminates the tax that has been imposed on them. 4) Co-ordination of VAT with direct taxation Most taxpayers cheat on their sales not to evade VAT but to evade personal and corporate income taxes. The operation of a VAT resembles that of the income tax more than that of other taxes, and an effective VAT greatly aids income tax administration and revenue collection. It is interesting to note that when Trinidad and Tobago set out to introduce VAT it chose one of its top income tax administrators as the VAT Commissioner. It must be stressed once again that if properly implemented VAT can ultimately lead to a reduction in overall rates of tax. Revenues will not be sacrificed but would in fact be enhanced as a consequence of the broadened tax base. This does not seem to be a bad idea at all.

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Value Added Taxes (VAT) in India

Value Added Tax (VAT) is nothing but a general consumption tax that is assessed on the value added to good tax on the consumption of the goods, paid by its original producers upon the change in goods or upon the trans ultimate consumers. It is based on the value of the goods, added by the transferor. It is the tax in relation to the added by the transferor and not just a profit.

All over the world, VAT is payable on the goods and services as they form a part of national GDP. More than have introduced VAT over the past 3 decades; India being amongst the last few to introduce it.

It means every seller of goods and service providers charges the tax after availing the input tax credit. It is the under which tax is collected in each stage on the value added of the goods. In practice, the dealer charges the t goods, sold to the consumer and at every end of the tax period reduces the tax collected on sale and tax charge whom he purchased the goods and deposits such amount of tax in government treasury.

VAT is a multi-stage tax, levied only on value that is added at each stage in the cycle of production of goods a provision of a set-off for the tax paid at earlier stages in the cycle/chain. The aim is to avoid 'cascading', which effect on the prices. It is assumed that because of cross-checking in a multi-staged tax; tax evasion would be c higher revenues to the government. Importance of VAT in India

India, particularly being a trading community, has always believed in accepting and adopting loopholes in any State or Centre. If a well-administered system comes in, it will not only close options for traders and businessm taxes, but also make sure that they'll be compelled to keep proper records of sales and purchases.

Under the VAT system, no exemptions are given and a tax will be levied at every stage of manufacture of a pr value-addition, the tax that is levied on the inputs can be claimed back from tax authorities. At a macro level, two issues make the introduction of VAT critical for India

Industry watchers believe that the VAT system, if enforced properly, will form part of the fiscal consolidation could, in fact, help address issues like fiscal deficit problem. Also the revenues estimated to be collected can a fiscal deficit burden for the government.

International Monetary Fund (IMF), in the semi-annual World Economic Outlook expressed its concern for In 10 per cent of GDP.

Moreover any globally accepted tax administrative system would only help India integrate better in the World Advantages of VAT

1. Coverage If the tax is considered on a retail level, it offers all the economic advantages of a tax of t its scope. The direct payment of tax spreads out over a large number of firms instead of being concentr groups, such as wholesalers & retailers. 2. Revenue Security - Under VAT only buyers at the final stage have an interest in undervaluing their pu system ensures that buyers at earlier stages are refunded the taxes on their purchases. Therefore, tax lo will be limited to the value added at the last stage.

Secondly, under VAT, if the payment of tax is avoided at one stage nothing will be lost if it is picked u not picked up later, the government will at least have collected the VAT paid at previous stages. Wher

the final/last stage the state will lose only tax on the value added at that particular point.

3. Selectivity - VAT is selectively applied to specific goods & business entities. In addition, VAT does n because of the consumption-type. VAT gives full credit for tax included on purchases of capital goods 4. Co-ordination of VAT with direct taxation - Most taxpayers cheat on sales not to evade VAT but to corporate income taxes. Operation of VAT resembles that of the income tax and an effective VAT grea administration and revenue collection. To know more about advantages of VAT click here: Advantages of VAT Disadvantages of VAT 1. 2. 3. 4. VAT is regressive VAT is difficult to operate from position of both administration and business VAT is inflationary VAT favors capital intensive firms

Items covered under VAT

All business transactions that are carried on within a State by individuals/partnerships/ companies etc. More than 550 items are covered under the new Indian VAT regime out of which 46 natural & unproc exempt from VAT Nearly 270 items including drugs and medicines, all industrial and agricultural inputs, capital goods as would attract 4 % VAT in India. The remaining items would attract 12.5 % VAT. Precious metals such as gold and bullion will be taxe Petrol and diesel are kept out of the VAT regime in India.

Tax implication under Value Added Tax Act Selling Price (Excluding Tax) 100 114 Invoice value (InclTax) 104 128.25 4 14.25 Tax Payable 0

Seller A B B C

Buyer

Tax Rate 4% CST 12.5% VAT 12.5% VAT 12.5% VAT

0*

124

139.50

15.50

14

Consumer

134

150.75

16.75

15

Total to Govt.

V C

Difference Between VAT And CST Silent Features Of VAT Methods Of Collecting And Charging The VAT Constitutional Framework Which Deals With The Levy Of Sale Tax

Levies Of Tax Und Who Is The Dealer? Special Additional Relevant Compone VAT In Various Sta

VAT In Andhra Pradesh | VAT In Delhi | VAT In Gujarat | VAT In Karnataka | VAT In Kerala | VAT In Mah Pradesh | VAT In Orissa | VAT In Rajasthan | VAT In Tamil Nadu | VAT In Uttaranchal | VAT In Uttar Prad India Tax System Income Tax Service Tax Wealth Tax Sales Tax Salary & Perquisites TDS Gift Tax Capital Gains Retirement Benefits Housing Property Partnership Firms Trusts VAT In India Indian Budget 2009-10 Inflation Corporate Tax in India Tax Structure in India Tax Planning for 2010 Investment In India Savings Schemes In India Mutual Funds Insurance FDI in India Derivatives Portfolio Management Services ULIPs or Mutual Funds Financial Planning Process Risk and Return Analysis Financial Instruments for Tax Saving Estate Planning Hedge Funds Emerging Investment Avenues Equity and Equity Capital Investment in Art Investments in Global Markets Options Trading Measures for Security and Portfolio Analysis ULIP ETF Current Accounts Working Capital NRI Investments Online Trading Finance & Economy In India Capital Market Foreign Exchange Market Fundamental Analysis Money Market Reserve Bank of India Stock Markets Technical Analysis Economic Policies Personal Finance Corporate Finance Economy of India GDP India Credit Crisis Financial Ratios Anti Money Laundering Regulatory Environment Financial Intermediaries Securities and Exchange Board of India Insurance Regulatory and Development Authority Money and Its Importance

Banking Role of Banks Automated Teller Machin Branch Banking Internet Banking Phone Banking and Mobi Banking Banks as Financial Intermediaries Demat Account Demand Deposits Term Deposits Retail Loans Investment Banking

Forex Trading Day Trading Types of Banks Introduction to Depositories Value and Growth Investing Stock and Commodity Trading
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Web

tax4india.com

Value Added Taxes (VAT) in India

Value Added Tax (VAT) is nothing but a general consumption tax that is assessed on the value added to good tax on the consumption of the goods, paid by its original producers upon the change in goods or upon the trans ultimate consumers. It is based on the value of the goods, added by the transferor. It is the tax in relation to the added by the transferor and not just a profit.

All over the world, VAT is payable on the goods and services as they form a part of national GDP. More than have introduced VAT over the past 3 decades; India being amongst the last few to introduce it.

It means every seller of goods and service providers charges the tax after availing the input tax credit. It is the under which tax is collected in each stage on the value added of the goods. In practice, the dealer charges the t goods, sold to the consumer and at every end of the tax period reduces the tax collected on sale and tax charge whom he purchased the goods and deposits such amount of tax in government treasury.

VAT is a multi-stage tax, levied only on value that is added at each stage in the cycle of production of goods a provision of a set-off for the tax paid at earlier stages in the cycle/chain. The aim is to avoid 'cascading', which effect on the prices. It is assumed that because of cross-checking in a multi-staged tax; tax evasion would be c higher revenues to the government.

Importance of VAT in India

India, particularly being a trading community, has always believed in accepting and adopting loopholes in any State or Centre. If a well-administered system comes in, it will not only close options for traders and businessm taxes, but also make sure that they'll be compelled to keep proper records of sales and purchases.

Under the VAT system, no exemptions are given and a tax will be levied at every stage of manufacture of a pr value-addition, the tax that is levied on the inputs can be claimed back from tax authorities. At a macro level, two issues make the introduction of VAT critical for India

Industry watchers believe that the VAT system, if enforced properly, will form part of the fiscal consolidation could, in fact, help address issues like fiscal deficit problem. Also the revenues estimated to be collected can a fiscal deficit burden for the government.

International Monetary Fund (IMF), in the semi-annual World Economic Outlook expressed its concern for In 10 per cent of GDP.

Moreover any globally accepted tax administrative system would only help India integrate better in the World Advantages of VAT

1. Coverage If the tax is considered on a retail level, it offers all the economic advantages of a tax of t its scope. The direct payment of tax spreads out over a large number of firms instead of being concentr groups, such as wholesalers & retailers. 2. Revenue Security - Under VAT only buyers at the final stage have an interest in undervaluing their pu system ensures that buyers at earlier stages are refunded the taxes on their purchases. Therefore, tax lo will be limited to the value added at the last stage.

Secondly, under VAT, if the payment of tax is avoided at one stage nothing will be lost if it is picked u not picked up later, the government will at least have collected the VAT paid at previous stages. Wher the final/last stage the state will lose only tax on the value added at that particular point.

3. Selectivity - VAT is selectively applied to specific goods & business entities. In addition, VAT does n because of the consumption-type. VAT gives full credit for tax included on purchases of capital goods 4. Co-ordination of VAT with direct taxation - Most taxpayers cheat on sales not to evade VAT but to corporate income taxes. Operation of VAT resembles that of the income tax and an effective VAT grea administration and revenue collection. To know more about advantages of VAT click here: Advantages of VAT Disadvantages of VAT 1. VAT is regressive 2. VAT is difficult to operate from position of both administration and business

3. VAT is inflationary 4. VAT favors capital intensive firms Items covered under VAT

All business transactions that are carried on within a State by individuals/partnerships/ companies etc. More than 550 items are covered under the new Indian VAT regime out of which 46 natural & unproc exempt from VAT Nearly 270 items including drugs and medicines, all industrial and agricultural inputs, capital goods as would attract 4 % VAT in India. The remaining items would attract 12.5 % VAT. Precious metals such as gold and bullion will be taxe Petrol and diesel are kept out of the VAT regime in India.

Tax implication under Value Added Tax Act Selling Price (Excluding Tax) 100 114 Invoice value (InclTax) 104 128.25 4 14.25 Tax Payable 0

Seller A B B C

Buyer

Tax Rate 4% CST 12.5% VAT 12.5% VAT 12.5% VAT

0*

124

139.50

15.50

14

Consumer

134

150.75

16.75

15

Total to Govt.

V C

Difference Between VAT And CST Silent Features Of VAT Methods Of Collecting And Charging The VAT Constitutional Framework Which Deals With The Levy Of Sale Tax

Levies Of Tax Und Who Is The Dealer? Special Additional Relevant Compone VAT In Various Sta

India Tax System Income Tax Service Tax Wealth Tax Sales Tax Salary & Perquisites TDS Gift Tax Capital Gains Retirement Benefits Housing Property Partnership Firms Trusts VAT In India Indian Budget 2009-10 Inflation Corporate Tax in India Tax Structure in India Tax Planning for 2010

Investment In India Savings Schemes In India Mutual Funds Insurance FDI in India Derivatives Portfolio Management Services ULIPs or Mutual Funds Financial Planning Process Risk and Return Analysis Financial Instruments for Tax Saving Estate Planning Hedge Funds Emerging Investment Avenues Equity and Equity Capital Investment in Art Investments in Global Markets Options Trading Measures for Security and Portfolio Analysis ULIP ETF Current Accounts Working Capital NRI Investments Online Trading Forex Trading Day Trading Types of Banks Introduction to Depositories Value and Growth Investing Stock and Commodity Trading

Finance & Economy In India Capital Market Foreign Exchange Market Fundamental Analysis Money Market Reserve Bank of India Stock Markets Technical Analysis Economic Policies Personal Finance Corporate Finance Economy of India GDP India Credit Crisis Financial Ratios Anti Money Laundering Regulatory Environment Financial Intermediaries Securities and Exchange Board of India Insurance Regulatory and Development Authority Money and Its Importance

Banking Role of Banks Automated Teller Machin Branch Banking Internet Banking Phone Banking and Mobi Banking Banks as Financial Intermediaries Demat Account Demand Deposits Term Deposits Retail Loans Investment Banking

Sitemap | Our Partners | Loan Calculator | Amortization Designed By SEO India Company.