Description
The PPT explaining Value Added Tax in India. It talks about benefits, implementation, effects and flaws with VAT. It also talks about GST(goods and service tax).
Value Added Tax in India
Experiences, Issues & Challenges
Click to edit Master subtitle style
Synopsis
• • • • • •
What is VAT? VAT vs. Sales Tax Timeline of VAT in India Implementation of VAT Flaws with VAT GST: Future of Taxation
What is VAT?
• •
•
VAT is an indirect tax It is a tax on the value added by each transferor in the distribution chain . The value addition is the difference in the value of the goods
Inter-state Sale under Karnataka Sales Tax
Seller A B C D Buyer B C D Consumer Selling Price Tax Rate 100 114 140.87 152.98 4 % CST Tax Amount 4 Total 104 130.87 142.98 155.27
14.8 % KST 16.87 1.5 % RST 1.5 % RST 2.11 2.29 25.27
Total Tax Payable
Inter-state Sale under Karnataka Value Added Tax
Seller Buyer Selling Price Tax Rate Invoice Value Tax Payable Tax Credit Net Tax
A B C
B C D
100 114 124
4 % CST 12.5 % KVAT 12.5 % KVAT
104 128.25 139.50
4 14.25 15.50
0 0 14.25
4 14.25 1.25
D
Consumer
134
12.5 % KVAT
150.75
16.75
15.50
1.25
Total
20.75
Intra-state Sale under Karnataka Sales Tax
Seller A B C D E Buyer B C D E Consumer Selling Price Tax Rate 40 51.60 63.66 83.08 94.33 4 % KST 4 % KST 14.8 % KST 1.5 % RST 1.5 % RST Tax Amount 1.60 2.06 9.42 1.25 1.41 19.40 Total 41.60 53.66 73.08 84.33 95.74
Total Tax Payable
Intra-state Sale under Karnataka Value Added Tax
Seller Buyer Selling Price 40 50 60 Tax Rate Invoice Value 45 56.25 67.50 Tax Payable 5 6.25 7.50 Tax Credit Net Tax 5 1.25 1.25
A B C
B C D
12.5 % KVAT 12.5 % KVAT 12.5 % KVAT
0 5 6.25
D
E
70
12.5 % KVAT
78.25
8.75
7.50
1.25
E
Consumer
80 Total
12.5 % KVAT
90
10
8.75
1.25 10
Benefits of VAT
• • • • •
Availability of input tax credit Self – assessment by dealers Increased state revenues Rationalisation of tax burden Move towards single taxation
Coverage of VAT
•
Products under VAT (550 Items)
–
– –
270 items like basic needs, like medicine, drugs, agro & industrial inputs, capital & declared goods fall under 4% VAT Rest fall under 12.5% VAT Gold & silver jewellery fall under 1% VAT
•
Products not falling under VAT
–
Petrol, diesel, liquor, tobacco, lottery
Timeline of VAT in India
All states agree to implement VAT at the Conference of Chief Ministers of States VAT implementation put off again to 2003
1999
2000
Government decides to implement VAT from 1st April 2001. However, it was deferred to next year
2001
2002
2003
VAT implementation deferred yet again. But, Haryana goes ahead to implement VAT
Timeline of VAT in India
20 states and 4 union territories implement VAT with effect from 1st April 2005
(contd.)
Tamil Nadu along with Pondicherry embraces the VAT regime
2004
2005
2006
2007
2008
VAT implemented in the 4 BJP ruled states and also in West Bengal
Uttar Pradesh becomes the final state to implement VAT. VAT now implemented in all states
Implementation of VAT
•
Reasons for delay in implementation
– –
Operational Problems Political Problems
•
Tax collections post implementation
State
Tax Collections post Implementation Tax Revenue Tax Revenue
2004 - 05 2005 – 06 11,524.24 9,988.64
Tax Revenue 2006 - 07
Andhra Pradesh (15.37% Increase)
Gujarat (22.63% Increase)
6,409.11
7,859.14
Madhya Pradesh (20.54% Increase)
3,951.43 (All figures in Rs. Crores)
4,763.08
Effect of VAT on Economy
• • • •
Low impact on food & beverage industry Mixed impact on cement industry Boost for the automobile sector De – growth of consumer durables
Flaws with VAT
•
Regressive taxation Evasion by entire chain Lack of uniformity of tax rates Absence of input credit on CST
•
•
•
GST: Future of Taxation
•
What is GST?
– –
Single level tax system State and Central taxes rolled into one
GST: Future of Taxation
•
Benefits of GST
– – – –
Greater transparency Lowered manufacturing costs Improved tax to GDP ratio Compliance easier and cheaper
GST: Future of Taxation
•
GST in India
–
– –
2003: Kelkar Committee Report formulates GST structure in India GST planned to be implemented in 2010 Unified GST vs. Dual GST
Thank You
References
•
Websites:
–
www.finance.indiamart.com www.hinduonnet.com www.economywatch.com www.indiabudget.nic.in www.finmin.nic.in www.cag.gov.in www.financialexpress.com
–
–
–
–
–
–
References
•
Books / Journals / Magazines / Other Documents
–
"Problems in Implementation of VAT" by Prof. Pawan K. Aggarwal of National Institute of Public Finance and Policy “VAT” –Paper presented by Sanjay Dhariwal M., Chartered Accountant “VAT: Issues and Concerns” – Paper presented by Dev Bajpai of Marico Limited “Goods and Services Tax in India Trade – A Note” - Paper presented by Praveen Khandelwal of Confederation of All India Traders India Today – April 7, 2003 issue
–
–
–
–
doc_706543847.pptx
The PPT explaining Value Added Tax in India. It talks about benefits, implementation, effects and flaws with VAT. It also talks about GST(goods and service tax).
Value Added Tax in India
Experiences, Issues & Challenges
Click to edit Master subtitle style
Synopsis
• • • • • •
What is VAT? VAT vs. Sales Tax Timeline of VAT in India Implementation of VAT Flaws with VAT GST: Future of Taxation
What is VAT?
• •
•
VAT is an indirect tax It is a tax on the value added by each transferor in the distribution chain . The value addition is the difference in the value of the goods
Inter-state Sale under Karnataka Sales Tax
Seller A B C D Buyer B C D Consumer Selling Price Tax Rate 100 114 140.87 152.98 4 % CST Tax Amount 4 Total 104 130.87 142.98 155.27
14.8 % KST 16.87 1.5 % RST 1.5 % RST 2.11 2.29 25.27
Total Tax Payable
Inter-state Sale under Karnataka Value Added Tax
Seller Buyer Selling Price Tax Rate Invoice Value Tax Payable Tax Credit Net Tax
A B C
B C D
100 114 124
4 % CST 12.5 % KVAT 12.5 % KVAT
104 128.25 139.50
4 14.25 15.50
0 0 14.25
4 14.25 1.25
D
Consumer
134
12.5 % KVAT
150.75
16.75
15.50
1.25
Total
20.75
Intra-state Sale under Karnataka Sales Tax
Seller A B C D E Buyer B C D E Consumer Selling Price Tax Rate 40 51.60 63.66 83.08 94.33 4 % KST 4 % KST 14.8 % KST 1.5 % RST 1.5 % RST Tax Amount 1.60 2.06 9.42 1.25 1.41 19.40 Total 41.60 53.66 73.08 84.33 95.74
Total Tax Payable
Intra-state Sale under Karnataka Value Added Tax
Seller Buyer Selling Price 40 50 60 Tax Rate Invoice Value 45 56.25 67.50 Tax Payable 5 6.25 7.50 Tax Credit Net Tax 5 1.25 1.25
A B C
B C D
12.5 % KVAT 12.5 % KVAT 12.5 % KVAT
0 5 6.25
D
E
70
12.5 % KVAT
78.25
8.75
7.50
1.25
E
Consumer
80 Total
12.5 % KVAT
90
10
8.75
1.25 10
Benefits of VAT
• • • • •
Availability of input tax credit Self – assessment by dealers Increased state revenues Rationalisation of tax burden Move towards single taxation
Coverage of VAT
•
Products under VAT (550 Items)
–
– –
270 items like basic needs, like medicine, drugs, agro & industrial inputs, capital & declared goods fall under 4% VAT Rest fall under 12.5% VAT Gold & silver jewellery fall under 1% VAT
•
Products not falling under VAT
–
Petrol, diesel, liquor, tobacco, lottery
Timeline of VAT in India
All states agree to implement VAT at the Conference of Chief Ministers of States VAT implementation put off again to 2003
1999
2000
Government decides to implement VAT from 1st April 2001. However, it was deferred to next year
2001
2002
2003
VAT implementation deferred yet again. But, Haryana goes ahead to implement VAT
Timeline of VAT in India
20 states and 4 union territories implement VAT with effect from 1st April 2005
(contd.)
Tamil Nadu along with Pondicherry embraces the VAT regime
2004
2005
2006
2007
2008
VAT implemented in the 4 BJP ruled states and also in West Bengal
Uttar Pradesh becomes the final state to implement VAT. VAT now implemented in all states
Implementation of VAT
•
Reasons for delay in implementation
– –
Operational Problems Political Problems
•
Tax collections post implementation
State
Tax Collections post Implementation Tax Revenue Tax Revenue
2004 - 05 2005 – 06 11,524.24 9,988.64
Tax Revenue 2006 - 07
Andhra Pradesh (15.37% Increase)
Gujarat (22.63% Increase)
6,409.11
7,859.14
Madhya Pradesh (20.54% Increase)
3,951.43 (All figures in Rs. Crores)
4,763.08
Effect of VAT on Economy
• • • •
Low impact on food & beverage industry Mixed impact on cement industry Boost for the automobile sector De – growth of consumer durables
Flaws with VAT
•
Regressive taxation Evasion by entire chain Lack of uniformity of tax rates Absence of input credit on CST
•
•
•
GST: Future of Taxation
•
What is GST?
– –
Single level tax system State and Central taxes rolled into one
GST: Future of Taxation
•
Benefits of GST
– – – –
Greater transparency Lowered manufacturing costs Improved tax to GDP ratio Compliance easier and cheaper
GST: Future of Taxation
•
GST in India
–
– –
2003: Kelkar Committee Report formulates GST structure in India GST planned to be implemented in 2010 Unified GST vs. Dual GST
Thank You
References
•
Websites:
–
www.finance.indiamart.com www.hinduonnet.com www.economywatch.com www.indiabudget.nic.in www.finmin.nic.in www.cag.gov.in www.financialexpress.com
–
–
–
–
–
–
References
•
Books / Journals / Magazines / Other Documents
–
"Problems in Implementation of VAT" by Prof. Pawan K. Aggarwal of National Institute of Public Finance and Policy “VAT” –Paper presented by Sanjay Dhariwal M., Chartered Accountant “VAT: Issues and Concerns” – Paper presented by Dev Bajpai of Marico Limited “Goods and Services Tax in India Trade – A Note” - Paper presented by Praveen Khandelwal of Confederation of All India Traders India Today – April 7, 2003 issue
–
–
–
–
doc_706543847.pptx