abhishreshthaa
Abhijeet S
VAT, AS IMPOSED BY THE STATES IN INDIA
It is a tax only on sale or purchase of goods. It is a value added sale s tax. (Thus it is not payable on manufacture of goods or any movement other than sale).
VAT is a form of sales tax.
Unlike retail sales tax or the present sales tax scheme, which is essentially a single point tax, VAT is charged and collected at each stage of the sale, on the portion of the value added in the goods sold.
THE FRAMEWORK FOR THE LEVY UNDER THE CONSTITUTION AND OTHERWISE
For the purpose of levy of tax on goods:
• Constitutional framework empowers the States to levy tax.
• Parliament has framed CST act.
• States are in the process of enacting VAT laws.
• The unions Territories are in the process of enacting the required Regulations.
ON WHICH SALES\ PURCHASES, THE STATE CAN LEVY TAX?
The constitution empowers the States to levy and impose sales tax.
Simply stated, sale and purchase of goods would and could include:
1. Sale or purchase of goods as defined in the Sale of Goods Act or as commonly understood;
2. Transfer of property in any goods otherwise than in pursuance of a contract;
3. Transfer of property in goods used in works contract;
4. Delivery of goods on hire purchase or installments;
5. Transfer of right to use goods or Lease:
6. Supply of goods by a club or body to its members; and
7. Supply of food or any other article or drink for consumption.
8. The transactions referred in (c) to (g) are referred as deemed sale.
9. The power can be exercised by enacting a law for the purpose.
10. This power is subject to the restriction contained in the Constitution as well as CST Act.
MATTERS DEALT BY CST ACT:
CST act deals with three important subject matters:
1. Liability to tax on interstate sale include Deemed sale and rate of tax i.e. CST
2. Principles for determining when a sale taken place:
• Inside the state; or
• Outside the state; or
• In course of export or import; or
• In the course of interstate trade or commerce; and
3. Declared goods i.e. goods of special importance and restrictions and conditions with regard to rates.
To facilitate the implementation of VAT laws, CST Act has been amended to provide that tax on declared goods can be levied at any and every point.
To start with, CST would be continued to be levied on interstate sale or purchase of goods and no credit thereof would be allowed.
However, a dealer at his option may be permitted to utilize excess input tax credit to pay or discharge CST liability.
THE STATE LAWS DEAL WITH:
Generally:
• A state law provides for the levy.
• A dealer selling or purchasing goods in the course of trade, commerce or business is liable to tax.
• Such liability arises, if the turnover exceeds the threshold limit, if any.
• A dealer is required to register under the State law.
• The State Law makes provisions for creating the liability, payment, credit for the tax paid on inputs, assessment and procedural formality, appeal, maintenance of accounts and records, issue of various declarations including tax invoice, tax incentives for certain industry or areas and so on.
To determine cost of tax on any commodity, the provisions (of the VAT laws) may be classified into:
• Prescribing and\or classifying goods; rate of tax; and point of levy; and
• Laying down the mode and manner of computing sale price; turnover; taxable turnover; set off (input tax credit); etc.
Essentially the tax is on sale or purchase of goods. In other words the tax, under VAT laws, continues to be a tax on sales.
It is a tax only on sale or purchase of goods. It is a value added sale s tax. (Thus it is not payable on manufacture of goods or any movement other than sale).
VAT is a form of sales tax.
Unlike retail sales tax or the present sales tax scheme, which is essentially a single point tax, VAT is charged and collected at each stage of the sale, on the portion of the value added in the goods sold.
THE FRAMEWORK FOR THE LEVY UNDER THE CONSTITUTION AND OTHERWISE
For the purpose of levy of tax on goods:
• Constitutional framework empowers the States to levy tax.
• Parliament has framed CST act.
• States are in the process of enacting VAT laws.
• The unions Territories are in the process of enacting the required Regulations.
ON WHICH SALES\ PURCHASES, THE STATE CAN LEVY TAX?
The constitution empowers the States to levy and impose sales tax.
Simply stated, sale and purchase of goods would and could include:
1. Sale or purchase of goods as defined in the Sale of Goods Act or as commonly understood;
2. Transfer of property in any goods otherwise than in pursuance of a contract;
3. Transfer of property in goods used in works contract;
4. Delivery of goods on hire purchase or installments;
5. Transfer of right to use goods or Lease:
6. Supply of goods by a club or body to its members; and
7. Supply of food or any other article or drink for consumption.
8. The transactions referred in (c) to (g) are referred as deemed sale.
9. The power can be exercised by enacting a law for the purpose.
10. This power is subject to the restriction contained in the Constitution as well as CST Act.
MATTERS DEALT BY CST ACT:
CST act deals with three important subject matters:
1. Liability to tax on interstate sale include Deemed sale and rate of tax i.e. CST
2. Principles for determining when a sale taken place:
• Inside the state; or
• Outside the state; or
• In course of export or import; or
• In the course of interstate trade or commerce; and
3. Declared goods i.e. goods of special importance and restrictions and conditions with regard to rates.
To facilitate the implementation of VAT laws, CST Act has been amended to provide that tax on declared goods can be levied at any and every point.
To start with, CST would be continued to be levied on interstate sale or purchase of goods and no credit thereof would be allowed.
However, a dealer at his option may be permitted to utilize excess input tax credit to pay or discharge CST liability.
THE STATE LAWS DEAL WITH:
Generally:
• A state law provides for the levy.
• A dealer selling or purchasing goods in the course of trade, commerce or business is liable to tax.
• Such liability arises, if the turnover exceeds the threshold limit, if any.
• A dealer is required to register under the State law.
• The State Law makes provisions for creating the liability, payment, credit for the tax paid on inputs, assessment and procedural formality, appeal, maintenance of accounts and records, issue of various declarations including tax invoice, tax incentives for certain industry or areas and so on.
To determine cost of tax on any commodity, the provisions (of the VAT laws) may be classified into:
• Prescribing and\or classifying goods; rate of tax; and point of levy; and
• Laying down the mode and manner of computing sale price; turnover; taxable turnover; set off (input tax credit); etc.
Essentially the tax is on sale or purchase of goods. In other words the tax, under VAT laws, continues to be a tax on sales.