EFFECT OF VAT ON CASH FLOW

[abhishreshthaa]

How does VAT affect cash flows?


Under sales tax regime, it is possible to purchase goods at concessional rate or without payment of tax, by furnishing prescribed declarations as to the user of goods.


Under VAT regime, it may not be possible to purchase goods at concessional rate or without payment of tax, by furnishing any declaration as to the user of goods.


To illustrate, an exporter could purchase goods for exports, without paying any tax, against prescribed declaration, under sales tax regime.


Under VAT regime, the exporter will have to purchase the goods by paying VAT and then claim credit thereof or refund. To the extend of VAT paid and till the credit is claimed or the refund is realized, the cash flows of the exporters would be affected.

 

[jitendra05]

How does VAT affect cash flows?


Under sales tax regime, it is possible to purchase goods at concessional rate or without payment of tax, by furnishing prescribed declarations as to the user of goods.


Under VAT regime, it may not be possible to purchase goods at concessional rate or without payment of tax, by furnishing any declaration as to the user of goods.


To illustrate, an exporter could purchase goods for exports, without paying any tax, against prescribed declaration, under sales tax regime.


Under VAT regime, the exporter will have to purchase the goods by paying VAT and then claim credit thereof or refund. To the extend of VAT paid and till the credit is claimed or the refund is realized, the cash flows of the exporters would be affected.

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