EFFECTS OF VAT

[abhishreshthaa]

VAT Effects on Tax Cost.

What are the determinants of tax cost generally?


The tax cost is mainly dependent on:

• Point of levy

• Classification of goods

• Applicable rate of tax (including additional levies, if any, like, surcharge, etc.)

• The nature and extend of any set off or credit available

• Nature of transactions and movement of goods relating thereto.


What would be the likely effects on implementation of VAT?

The implementation of VAT may:

• Increase the cost; or

• Decrease the cost; or

• Not have significant impact; or

• Affect cash flows; or

• Affect the nature of sale/purchase arrangement; or

• Affect the documentation, accounting records, forms; or

• Affect location(s) from where transaction(s) take place, originate or conclude, and so on.


Why there can be any increase or decrease in the tax cost (VAT)?

The increase or decrease can be on account of:

 Regrouping or reclassification of goods

 Different rate of tax

 Effectively VAT is paid on last point sale

 Collection of VAT in stages and at each point of sale

 Credit or set off of VAT

 Destination of sale and source of purchase

 User of goods.

 

[jitendra05]

VAT Effects on Tax Cost.

What are the determinants of tax cost generally?


The tax cost is mainly dependent on:

• Point of levy

• Classification of goods

• Applicable rate of tax (including additional levies, if any, like, surcharge, etc.)

• The nature and extend of any set off or credit available

• Nature of transactions and movement of goods relating thereto.


What would be the likely effects on implementation of VAT?

The implementation of VAT may:

• Increase the cost; or

• Decrease the cost; or

• Not have significant impact; or

• Affect cash flows; or

• Affect the nature of sale/purchase arrangement; or

• Affect the documentation, accounting records, forms; or

• Affect location(s) from where transaction(s) take place, originate or conclude, and so on.


Why there can be any increase or decrease in the tax cost (VAT)?

The increase or decrease can be on account of:

 Regrouping or reclassification of goods

 Different rate of tax

 Effectively VAT is paid on last point sale

 Collection of VAT in stages and at each point of sale

 Credit or set off of VAT

 Destination of sale and source of purchase

 User of goods.

Hey abhi, thanks for sharing and explaining about the effect of VAT and it is very important to understand its effect for everyone. Well, i am also sharing a document which would give some more detailed information on the effect of VAT system.