VAT and Its features

[abhishreshthaa]

VALUE ADDED TAX (VAT)

• IS A GENERAL CONSUMPTION TAX
  
  
• ASSESSED ON THE VALUE ADDED TO GOODS AND SERVICES.

WHAT DOES VAT GLOBALLY MEANS?

• Globally, VAT is regarded as a tax that is levied by the Central government.
  
  
• Over 130 countries worldwide have adopted VAT.
  
  
• VAT is a centrally-administered tax.

FEATURES:

• VAT is to be charged on the difference between the sale price of goods (Outputs) and the cost of purchases (Inputs).
  
  
• At each point of exchange, when value is added and it increases, vat is collected as part of the price.
  
  
• The final consumer bears the whole tax in the same way as if it was a sales tax charged at the retail level.
  
  
  
• What transactions are taxed from the view point of seller.
  
  
• It is a consumption tax because it is borne ultimately by the final consumer.
  
  
• It is not a charge on companies. It is charged as a percentage of price, which means that the actual tax burden is visible at each stage in the production and distribution chain.
  
  
  
• It is a multi-stage tax, lavied only on value added at each stage in the chain of production of goods
  
  
• Over 130 countries worldwide have introduced VAT over the past three decades and India is amongst the last few to introduce it.
  
  
  
• Imports and Exports are outside the purview of VAT
  
  
  
• It is assumed that due to cross-checking in a multi- staged tax, tax evasion will be checked, resulting in higher revenues to the government.

HOW IS VAT CALCULATED???


Example:
Purchase Price Rs 100
Sale Price Rs 150
Value Addition is the difference between sale price and purchase price i.e. Rs 50.
Tax is charged on the value addition of Rs. 50


HOW DOES VAT WORK?

• The seller of goods charges tax on the sale price (output tax).
  
  
  
• He then sets off the taxes paid on goods purchased (Input tax).
  
  
  
• Difference between output tax and Input taxes (i.e value added tax) needs to be paid to government.

 

[jitendra05]

VALUE ADDED TAX (VAT)

• IS A GENERAL CONSUMPTION TAX
  
  
• ASSESSED ON THE VALUE ADDED TO GOODS AND SERVICES.

WHAT DOES VAT GLOBALLY MEANS?

• Globally, VAT is regarded as a tax that is levied by the Central government.
  
  
• Over 130 countries worldwide have adopted VAT.
  
  
• VAT is a centrally-administered tax.

FEATURES:

• VAT is to be charged on the difference between the sale price of goods (Outputs) and the cost of purchases (Inputs).
  
  
• At each point of exchange, when value is added and it increases, vat is collected as part of the price.
  
  
• The final consumer bears the whole tax in the same way as if it was a sales tax charged at the retail level.
  
  
  
• What transactions are taxed from the view point of seller.
  
  
• It is a consumption tax because it is borne ultimately by the final consumer.
  
  
• It is not a charge on companies. It is charged as a percentage of price, which means that the actual tax burden is visible at each stage in the production and distribution chain.
  
  
  
• It is a multi-stage tax, lavied only on value added at each stage in the chain of production of goods
  
  
• Over 130 countries worldwide have introduced VAT over the past three decades and India is amongst the last few to introduce it.
  
  
  
• Imports and Exports are outside the purview of VAT
  
  
  
• It is assumed that due to cross-checking in a multi- staged tax, tax evasion will be checked, resulting in higher revenues to the government.

HOW IS VAT CALCULATED???


Example:
Purchase Price Rs 100
Sale Price Rs 150
Value Addition is the difference between sale price and purchase price i.e. Rs 50.
Tax is charged on the value addition of Rs. 50


HOW DOES VAT WORK?

• The seller of goods charges tax on the sale price (output tax).
  
  
  
• He then sets off the taxes paid on goods purchased (Input tax).
  
  
  
• Difference between output tax and Input taxes (i.e value added tax) needs to be paid to government.

Well abhi, as we know that VAT is the value added tax which is levied by the central government and it has been adopted in more than 100 countries. I am uploading a document for the better explanation of VAT and its features.