Anjumen-i-islamAnjumen-i-islam

Akber peerbhoy Akber peerbhoy college of com. & eco.college of com. & eco.

Project made by:Project made by:Kashif Naseem 12Kashif Naseem 12Mohammad Ayub 48Mohammad Ayub 48Javed 49Javed 49Manoj 09Manoj 09Dheraj 10Dheraj 10

project on:project on:VAT.VAT.

What is vat?What is vat?VAT (value added tax).VAT (value added tax).VAT is a simple, transparent tax collected on the VAT is a simple, transparent tax collected on the

sale of goods. From 1 April 2005, India, s state and sale of goods. From 1 April 2005, India, s state and union territories have decided to introduce VAT in union territories have decided to introduce VAT in

place of sales tax and related taxes. above a place of sales tax and related taxes. above a certain turnover ,all all business transactions on certain turnover ,all all business transactions on

within a state by individual in business , within a state by individual in business , partnership and company will be covered by VAT .it partnership and company will be covered by VAT .it

applies to all manufacture ,wholesaler, applies to all manufacture ,wholesaler, distributors ,stockiest and retailer dealing in distributors ,stockiest and retailer dealing in

taxable goods, by offsetting on inputs against that taxable goods, by offsetting on inputs against that on output, VAT does away with tax on tax. This on output, VAT does away with tax on tax. This includes VAT paid on purchases raw material or includes VAT paid on purchases raw material or

goods purchased for resale. Claiming your refund goods purchased for resale. Claiming your refund known as input tax credit (itc) under VAT ensure known as input tax credit (itc) under VAT ensure

proper invoicing. The copy the VAT invoice is proper invoicing. The copy the VAT invoice is needed to claim ITC. Overall, these features of VAT needed to claim ITC. Overall, these features of VAT encourage disclosure of complete information on encourage disclosure of complete information on

business turnover business turnover

The chain of the VATThe chain of the VAT As its name implies, you pay tax to government at As its name implies, you pay tax to government at

every stage when you add any product. It is a tax paid every stage when you add any product. It is a tax paid at every point of transaction. Starting with a raw at every point of transaction. Starting with a raw

material right thought to the final consumer, VAT is material right thought to the final consumer, VAT is paid to by the producer to the manufacturer. After the paid to by the producer to the manufacturer. After the

industrialist turns the raw material into finished industrialist turns the raw material into finished products, he pays VAT on the manufactured goods products, he pays VAT on the manufactured goods

after selling them to the distributor. When the after selling them to the distributor. When the distributor sell them to the wholesaller,he pays VAT. distributor sell them to the wholesaller,he pays VAT.

When the wholesaler sells them to the retailer, he pay When the wholesaler sells them to the retailer, he pay VAT. Finally, when the retailer sells to the consumer, he VAT. Finally, when the retailer sells to the consumer, he pays VAT. in this chain, in this chain everyone pay the pays VAT. in this chain, in this chain everyone pay the VAT and deduct the VAT already paid when he sell the VAT and deduct the VAT already paid when he sell the goods while paying deference in what he has paid goods while paying deference in what he has paid and collected from the next link in the chain. So at and collected from the next link in the chain. So at

every point, the taxpayer collects VAT and pays into every point, the taxpayer collects VAT and pays into the government’s tax collector’. the government’s tax collector’.

How the VAT different How the VAT different from the sales tax?from the sales tax?

There are the major fiancé between the sales tax and There are the major fiancé between the sales tax and VAT. While in sales tax the ultimate consumer tax on VAT. While in sales tax the ultimate consumer tax on same part(s) of the product more then once, in VAT, same part(s) of the product more then once, in VAT,

the consumer pays tax on the value of the entire the consumer pays tax on the value of the entire product only once. Lets take a example of a car which product only once. Lets take a example of a car which

we the sales tax. The car manufacturer does not we the sales tax. The car manufacturer does not manufacture the all parts that is go into it. The manufacture the all parts that is go into it. The

manufacturer make the body shell and fixes many manufacturer make the body shell and fixes many defiance auto parts into it-the engine, e gearbox, the defiance auto parts into it-the engine, e gearbox, the

radiator, the steering wheel, the tyres, the battery radiator, the steering wheel, the tyres, the battery and all other parts, he makes some, buys some and and all other parts, he makes some, buys some and

imports others. most inputs are sales tax paid . imports others. most inputs are sales tax paid .

Suppose someone makes the steering wheel or Suppose someone makes the steering wheel or the tyres and sales them to the car maker, the the tyres and sales them to the car maker, the sales tax paid on these parts. When the is made, sales tax paid on these parts. When the is made, it uses the part on which sales tax has already it uses the part on which sales tax has already been paid, and when you buy this car, you pay been paid, and when you buy this car, you pay sales tax on the value of whole car. That means if sales tax on the value of whole car. That means if there is a part like the engine, whish was valued there is a part like the engine, whish was valued at Rs 50,000 and the car is valued at 3 lakh, you at Rs 50,000 and the car is valued at 3 lakh, you again pay sales tax on Rs 50,000 because that again pay sales tax on Rs 50,000 because that has already gone into the cost of the car. Thus has already gone into the cost of the car. Thus you pay tax more than once. If you look into you pay tax more than once. If you look into making of the engine, then you realise that the making of the engine, then you realise that the engine manufacturer paid sales tax on the steel engine manufacturer paid sales tax on the steel that was used to make the engine. Some times that was used to make the engine. Some times you end up paying more then one tax as well. you end up paying more then one tax as well. Thus you are paying more taxes under sales tax. Thus you are paying more taxes under sales tax. But not under VAT.But not under VAT.

Under VAT, everyone who buy a product pay Under VAT, everyone who buy a product pay this tax. After adding value to it, he sells to this tax. After adding value to it, he sells to

his buyer. The seller adds VAT and collects it his buyer. The seller adds VAT and collects it from the buyer. After period of time, the from the buyer. After period of time, the trader fills up the VAT return, deduct the trader fills up the VAT return, deduct the

VAT he has paid to his supplier, and pay the VAT he has paid to his supplier, and pay the deference (or the tax on the value he ahs deference (or the tax on the value he ahs

added) to the government. This goes down added) to the government. This goes down the entire chine until it reaches the final the entire chine until it reaches the final costumer or consumer who pay tax only costumer or consumer who pay tax only

once all along the line. Thus VAT reduces the once all along the line. Thus VAT reduces the tax paid by the consumer.tax paid by the consumer.

WHAT ARE THE A WHAT ARE THE A MAIN FEATURE OF MAIN FEATURE OF

VAT?VAT?The salient features of VAT are:The salient features of VAT are:

An indirect tax payable by the consumer, VAT is a An indirect tax payable by the consumer, VAT is a tax paid at each point of exchange of goods where tax paid at each point of exchange of goods where value is added right from production or import to value is added right from production or import to

distributor, the wholesaler, the retailer and the final distributor, the wholesaler, the retailer and the final consumer.consumer.

It is charged on the deference between the price It is charged on the deference between the price of goods (output) and the cost of purchase or of goods (output) and the cost of purchase or

inputs.inputs. At each point of exchange, when value increases, At each point of exchange, when value increases, the tax is collected in the form of higher prices. The the tax is collected in the form of higher prices. The

final consumer bears the whole tax in the same final consumer bears the whole tax in the same way, as it was when sales tax was charged at the way, as it was when sales tax was charged at the

retail level.retail level.

VAT is user-friendlyVAT is user-friendly

Those, hard to get and harder to fill, sales tax form will be Those, hard to get and harder to fill, sales tax form will be a thing of the past. Once the basics are learnt, VAT will a thing of the past. Once the basics are learnt, VAT will

simplify tax calculation and filling of VAT returns. With tax simplify tax calculation and filling of VAT returns. With tax payable only on the value added calculating the tax amount payable only on the value added calculating the tax amount

will become easier. Just calculate the difference on your will become easier. Just calculate the difference on your purchases and sales during the period of the return you purchases and sales during the period of the return you

want to file, and you get to know your tax payable or how want to file, and you get to know your tax payable or how much you can claim your refund. This is self-much you can claim your refund. This is self-

assessment_how you assess your tax by your self. As simple assessment_how you assess your tax by your self. As simple as this.as this.

Small dealers with a turnover of less then Rs 5 lakh a year Small dealers with a turnover of less then Rs 5 lakh a year do not pay any VAT. So they can not complain. The next do not pay any VAT. So they can not complain. The next group of dealers with a turnover of between five and 50 group of dealers with a turnover of between five and 50 lakh have two choices: just pay one of the cent of the lakh have two choices: just pay one of the cent of the

turnover as VAT and there is no need to keep detailed VAT turnover as VAT and there is no need to keep detailed VAT account books, or register for VAT, if you find it useful for account books, or register for VAT, if you find it useful for

your business.your business.

You are automatically resisted for VAT if you are paying sales You are automatically resisted for VAT if you are paying sales tax. Your sales tax number becomes your VAT number. New tax. Your sales tax number becomes your VAT number. New

registration are supposed to take less time sales tax registration are supposed to take less time sales tax registration.registration.

Under VAT registration, there no need to get official Under VAT registration, there no need to get official permission to add more goods to your registration certificate permission to add more goods to your registration certificate

(RC) as was the with sales tax.(RC) as was the with sales tax.uniform tax rate all over India on 550 most traded products.uniform tax rate all over India on 550 most traded products.Uniform tax rate of tax (VAT) at 12.5 per cent, 4 per cent and Uniform tax rate of tax (VAT) at 12.5 per cent, 4 per cent and

14 per cent all over the country.14 per cent all over the country.Opening stock on 1 April can get the refund of sales tax paid Opening stock on 1 April can get the refund of sales tax paid on them as long as purchases made within one year before on them as long as purchases made within one year before

this date, i ,e after 31 march. Any tax paid on unsold stock will this date, i ,e after 31 march. Any tax paid on unsold stock will be taken as input tax credit and can be adjusted at the time of be taken as input tax credit and can be adjusted at the time of

payment your VAT in the tax return.payment your VAT in the tax return.

VAT credit will be uniformly allowed for tax paid on purchase VAT credit will be uniformly allowed for tax paid on purchase within the state from the VAT payable by a dealer. Credit will within the state from the VAT payable by a dealer. Credit will be calculated on a uniform basis all over the India. This will be calculated on a uniform basis all over the India. This will cover raw material, capital goods and items purchased for cover raw material, capital goods and items purchased for

resale by the VAT payerSelf-assessment by the traders.resale by the VAT payerSelf-assessment by the traders.VAT is relatively simple to administer. Taxpayer don’t have to VAT is relatively simple to administer. Taxpayer don’t have to

make frequently trips to the sales tax office. The entire system make frequently trips to the sales tax office. The entire system of sales tax is outdated and has been replaced by VAT in 130 of sales tax is outdated and has been replaced by VAT in 130

country.country.No tax inspectors’ harassment. You can file an objection No tax inspectors’ harassment. You can file an objection

against any VAT order passed by any authority. Ifno decision against any VAT order passed by any authority. Ifno decision has been taken on your objection within a fixed period, then it has been taken on your objection within a fixed period, then it

is deemed to be in your favour. Fair, isn’t it? is deemed to be in your favour. Fair, isn’t it? Less number of taxes as VAT will abolish many other taxes.Less number of taxes as VAT will abolish many other taxes.No VAT is payable on exports. Exporters will get tax refunds No VAT is payable on exports. Exporters will get tax refunds

on their purchase and other inputs. on their purchase and other inputs.

Is VAT good for India?Is VAT good for India?Yes, VAT IS good for India because.Yes, VAT IS good for India because.

India has become a single common market with no state India has become a single common market with no state checkpoints for entry of goods and not a market of 28 checkpoints for entry of goods and not a market of 28

different states and seven union territories. When goods can different states and seven union territories. When goods can be transported all over India without paying additional state be transported all over India without paying additional state and local. Taxes, their prices is come down as compare to and local. Taxes, their prices is come down as compare to sales tax. Thus the demand by domestic consumer will go sales tax. Thus the demand by domestic consumer will go

up. So industrialists will produce more and expand their up. So industrialists will produce more and expand their factories and create more jobs.factories and create more jobs.

Indian goods become the cheaper in the world markets as Indian goods become the cheaper in the world markets as they bear less taxes and so Indian exports will increase. This they bear less taxes and so Indian exports will increase. This

means more industrial expansion and more income.means more industrial expansion and more income.With simple and transparent tax laws and administration, With simple and transparent tax laws and administration,

there will be no ‘inspector Raj’ in the future. there will be no ‘inspector Raj’ in the future.

•Wherever VAT has been introduced, the tax Wherever VAT has been introduced, the tax collected by the government rises many times. collected by the government rises many times.

Haryana was the first state to introduce the VAT in Haryana was the first state to introduce the VAT in 2003 and its revenue increased by 27.5 percent in 2003 and its revenue increased by 27.5 percent in two year. More revenue means more facilities and two year. More revenue means more facilities and services for the citizens. This means more roads, services for the citizens. This means more roads, bridges, hospitals, schools, and other facilities for bridges, hospitals, schools, and other facilities for

the citizen. the citizen.

All this result in higher economic growth. It is All this result in higher economic growth. It is estimated that the Indian economy will grow by up estimated that the Indian economy will grow by up to 2% more per year when VAT is in full use. This to 2% more per year when VAT is in full use. This means that India will move faster on the road to means that India will move faster on the road to becoming an economic superpower in the world. becoming an economic superpower in the world.

Basic Rate of the Basic Rate of the VAT:VAT:

Many different rates in the former sales tax structure Many different rates in the former sales tax structure are removed with the introduction of VAT. Under the are removed with the introduction of VAT. Under the

VAT system, covering about 550 goods, there are VAT system, covering about 550 goods, there are only three main VAT rate: 1 per cent, 4 per cent and only three main VAT rate: 1 per cent, 4 per cent and

12.5 per cent.12.5 per cent.The stander VAT rate is 12.5 per cent generally The stander VAT rate is 12.5 per cent generally

payable on most consumer goods. This category is payable on most consumer goods. This category is known as revenue neutral rate or RNR.known as revenue neutral rate or RNR.

A 4 per cent VAT is payable on basic necessities, A 4 per cent VAT is payable on basic necessities, (including medicine and drugs), all industrial and (including medicine and drugs), all industrial and

agriculture raw material, declared goods and capital agriculture raw material, declared goods and capital goods consisting of about 270 items. The 4 per cent goods consisting of about 270 items. The 4 per cent VAT rate category has the largest number of goods VAT rate category has the largest number of goods

common for all states.common for all states.

Why customers fear Why customers fear VAT?VAT?

Customer or consumer fear that prices Customer or consumer fear that prices of all goods including some farm of all goods including some farm

produce will be taxed at a higher rate of produce will be taxed at a higher rate of 12.5 per cent and other goods such as 12.5 per cent and other goods such as

salt will be taxed.salt will be taxed.A trader or businessmen will charge A trader or businessmen will charge

more and blame it on VAT. True, this has more and blame it on VAT. True, this has happened in some countries when VAT. happened in some countries when VAT.

Was first introduced.Was first introduced.

In fact, a short time after VAT is introduced; prices In fact, a short time after VAT is introduced; prices decline as the customers get to know how it decline as the customers get to know how it

works. This is the experience of many countries works. This is the experience of many countries and is expected to be the same in India. Most and is expected to be the same in India. Most state in India tax personal products such as state in India tax personal products such as

soaps, shaving creams toothpastes etc; at 16 per soaps, shaving creams toothpastes etc; at 16 per cent and so their price s will decline. Moreover, cent and so their price s will decline. Moreover,

VAT means that they do not pay cascading taxes VAT means that they do not pay cascading taxes or tax on amounting to higher taxes as they did or tax on amounting to higher taxes as they did

under the sales tax system.under the sales tax system.