VALUE ADDED TAX (VAT)
VAT Terminology <ul><li>VAT – Value Added Tax –  </li></ul><ul><li>This is the new system being implemented from April 1, ...
TYPES OF  REGISTRATION <ul><li>COMPULSORY REGISTRATION </li></ul><ul><li>VOLUNTARY REGISTRATION </li></ul><ul><li>SUO MOTU...
VAT REGISTRATION <ul><li>COMPLUSARY REGISTRATION </li></ul><ul><li>TURNOVER EXCEEDING 2 LAKHS </li></ul><ul><li>TRANSFER O...
<ul><li>OPTIONAL REGISTRATION </li></ul><ul><li>Other Dealers not covered above registration is optional. </li></ul>
VAT RATES <ul><li>There are three main rates for Input and Output Vat tax.  </li></ul><ul><li>0% for Agriculture  products...
SCHEDULES TO VAT RATES <ul><li>EXEMPTED GOODS </li></ul><ul><li>Agricultural implements manually operated </li></ul><ul><l...
<ul><li>Taxable at One Percent  </li></ul><ul><li>Bullion and Specie </li></ul><ul><li>Jewellery </li></ul><ul><li>Preciou...
<ul><li>Taxable at Four Percent </li></ul><ul><li>Agricultural implements not operated manually </li></ul><ul><li>All kind...
<ul><li>Taxable at Twenty Percent </li></ul><ul><li>Narcotics  </li></ul><ul><li>Molasses  </li></ul>
SALES TAX <ul><li>100  250  300 </li></ul><ul><li>X  Y  Z </li></ul><ul><li>TAX = 100 * 10%  TAX = 250 * 10%  TAX=300*10% ...
VAT TAXATION <ul><li>100  250  300 </li></ul><ul><li>X  Y  Z </li></ul><ul><li>TAX = 100 * 10%  TAX = 150 * 10%  TAX=50*10...
VAT Terminology – Input Tax <ul><li>INPUT TAX </li></ul><ul><li>Input Tax is the Tax shown in our purchase bills.  </li></...
INPUT VAT TAXATION <ul><li>1000 </li></ul><ul><li>X  Y </li></ul><ul><li>INPUT TAX for Y is 1000*10%=100 </li></ul>
VAT Terminology – Output Tax <ul><li>OUTPUT TAX </li></ul><ul><li>Output Tax is the Tax charged on all the Taxable sales o...
OUTPUT VAT TAXATION <ul><li>1000 </li></ul><ul><li>X  Y </li></ul><ul><li>OUTPUT TAX for X is 1000*10%=100  </li></ul>
NET TAX <ul><li>NET TAX =  OUTPUT TAX – INPUT TAX </li></ul><ul><li>Tax payable if OUTPUT TAX is greater than INPUT TAX </...
NET TAX COMPUTATION <ul><li>100  150  200 </li></ul><ul><li>X  Y  Z </li></ul><ul><li>OUTPUT TAX FOR Y = 150 * 10% =15 </l...
NET TAX COMPUTATION <ul><li>100  75  50 </li></ul><ul><li>X  Y  Z </li></ul><ul><li>OUTPUT TAX FOR Y = 75 * 10% =7.5 </li>...
Input Tax Amount Calculation <ul><li>Month Purchases Gross Value X Rate of Tax </li></ul><ul><li>For ex.:  </li></ul><ul><...
Output Tax Amount Calculation  <ul><li>Month Sales X Rate of Tax </li></ul><ul><li>Output Tax = 20,00,000 * 0.04 = 80,000/...
BOOKS TO BE MAINTAINED <ul><li>Purchase Register </li></ul><ul><li>Sales Register </li></ul><ul><li>URD Register </li></ul...
AUDIT COMPLIANCE <ul><li>Every Dealer whose taxable turnover exceeds 25 lakhs must get his books audited by a practicing C...
DATE OF FILLING THE RETURNS <ul><li>Monthly Sales and Purchases must be filled by every dealer before the 20 th  of next m...
FORMS OF VAT <ul><li>FORM NO. </li></ul><ul><li>VAT 1 </li></ul><ul><li>VAT 2 </li></ul><ul><li>VAT 7 </li></ul><ul><li>VA...
KINDS OF ASSESSMENT <ul><li>Self Assessment </li></ul><ul><li>Protective Assessment </li></ul><ul><li>Best Judgement Asses...
Authorities of VAT <ul><li>COMMISSIONER </li></ul><ul><li>DEPUTY COMMISSIONER </li></ul><ul><li>ASSISTANT COMMISSIONER </l...
GUIDANCE NOTE BY ICAI <ul><li>Input tax paid on purchases of inputs (VAT Credit) should not be included in the cost of pur...
Benefits of VAT <ul><li>No Cascading Effect </li></ul><ul><li>Coverage   </li></ul><ul><li>Revenue security  </li></ul><ul...
COMPARITIVE STUDY OF VAT AND CST <ul><li>Multiplicity of levies on different tax base </li></ul><ul><li>Simple to understa...
VAT Revenue <ul><li>VAT implementing states has shown an increase of 27.1 per cent during the first quarter of August 2006...
VAT IN OTHER COUNTRIES <ul><li>ARGENTINA </li></ul><ul><li>BRAZIL </li></ul><ul><li>NEPAL </li></ul><ul><li>CANNADA </li><...
VAT IN OTHER COUNTRIES <ul><li>NAME OF COUNTRIES </li></ul><ul><li>Sweden </li></ul><ul><li>Poland </li></ul><ul><li>Unite...
<ul><li>In Brazil, in 1968, VAT revenue, as a percentage of total tax revenue was 51.03, while in 1985 it became 21.91, an...
MODEL VAT FOR INDIA <ul><li>One Country One VAT </li></ul><ul><li>CST must be abolished </li></ul><ul><li>Only few Tax Rat...
UK VAT <ul><li>REGISTRATION </li></ul><ul><li>TAX RATES </li></ul><ul><li>FILLING OF RETURNS </li></ul>
<ul><li>THANK YOU </li></ul>
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Value Added Tax

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Value Added Tax

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Value Added Tax

  1. 1. VALUE ADDED TAX (VAT)
  2. 2. VAT Terminology <ul><li>VAT – Value Added Tax – </li></ul><ul><li>This is the new system being implemented from April 1, 2003 in Karnataka </li></ul><ul><li>Unlike, Sales Tax, VAT is calculated based on Input & Output variation. </li></ul>
  3. 3. TYPES OF REGISTRATION <ul><li>COMPULSORY REGISTRATION </li></ul><ul><li>VOLUNTARY REGISTRATION </li></ul><ul><li>SUO MOTU REGISTRATION </li></ul><ul><li>TEMPORARY REGISTRATION </li></ul>
  4. 4. VAT REGISTRATION <ul><li>COMPLUSARY REGISTRATION </li></ul><ul><li>TURNOVER EXCEEDING 2 LAKHS </li></ul><ul><li>TRANSFER OF BUSINESS </li></ul><ul><li>CAUSAL DEALERS </li></ul>
  5. 5. <ul><li>OPTIONAL REGISTRATION </li></ul><ul><li>Other Dealers not covered above registration is optional. </li></ul>
  6. 6. VAT RATES <ul><li>There are three main rates for Input and Output Vat tax. </li></ul><ul><li>0% for Agriculture products etc (Exempted Goods) </li></ul><ul><li>1% for Jewellery </li></ul><ul><li>4% for Pharmacy, Computers, Soaps etc. </li></ul><ul><li>12.5% for FMCG, Automobile </li></ul>
  7. 7. SCHEDULES TO VAT RATES <ul><li>EXEMPTED GOODS </li></ul><ul><li>Agricultural implements manually operated </li></ul><ul><li>Cotton and silk yarn </li></ul><ul><li>Curd and Butter Milk </li></ul><ul><li>National Flag </li></ul><ul><li>Salt </li></ul>
  8. 8. <ul><li>Taxable at One Percent </li></ul><ul><li>Bullion and Specie </li></ul><ul><li>Jewellery </li></ul><ul><li>Precious and Semi-precious stones </li></ul>
  9. 9. <ul><li>Taxable at Four Percent </li></ul><ul><li>Agricultural implements not operated manually </li></ul><ul><li>All kinds of Bricks </li></ul><ul><li>Animal hair </li></ul><ul><li>Kerosene </li></ul><ul><li>Umbrella </li></ul>
  10. 10. <ul><li>Taxable at Twenty Percent </li></ul><ul><li>Narcotics </li></ul><ul><li>Molasses </li></ul>
  11. 11. SALES TAX <ul><li>100 250 300 </li></ul><ul><li>X Y Z </li></ul><ul><li>TAX = 100 * 10% TAX = 250 * 10% TAX=300*10% </li></ul><ul><li> = 10 = 25 =30 </li></ul>
  12. 12. VAT TAXATION <ul><li>100 250 300 </li></ul><ul><li>X Y Z </li></ul><ul><li>TAX = 100 * 10% TAX = 150 * 10% TAX=50*10% </li></ul><ul><li> = 10 = 15 = 5 </li></ul>
  13. 13. VAT Terminology – Input Tax <ul><li>INPUT TAX </li></ul><ul><li>Input Tax is the Tax shown in our purchase bills. </li></ul><ul><li>As per the norms, every trader need to show VAT separately and it is considered as Input Tax. </li></ul><ul><li>Apart from Trade Purchases, Tax on Capital Goods purchases like A.C., Computers etc.. is also considered for this Input Tax. </li></ul>
  14. 14. INPUT VAT TAXATION <ul><li>1000 </li></ul><ul><li>X Y </li></ul><ul><li>INPUT TAX for Y is 1000*10%=100 </li></ul>
  15. 15. VAT Terminology – Output Tax <ul><li>OUTPUT TAX </li></ul><ul><li>Output Tax is the Tax charged on all the Taxable sales of a Vat Dealer. </li></ul><ul><li>For Ex. Tax shown as Output Tax and it becomes Input Tax for our customer. </li></ul>
  16. 16. OUTPUT VAT TAXATION <ul><li>1000 </li></ul><ul><li>X Y </li></ul><ul><li>OUTPUT TAX for X is 1000*10%=100 </li></ul>
  17. 17. NET TAX <ul><li>NET TAX = OUTPUT TAX – INPUT TAX </li></ul><ul><li>Tax payable if OUTPUT TAX is greater than INPUT TAX </li></ul><ul><li>Tax refund if INPUT TAX is greater than OUTPUT TAX ( VAT CREDIT). </li></ul>
  18. 18. NET TAX COMPUTATION <ul><li>100 150 200 </li></ul><ul><li>X Y Z </li></ul><ul><li>OUTPUT TAX FOR Y = 150 * 10% =15 </li></ul><ul><li>INPUT TAX FOR Y = 100* 10 %=10 </li></ul><ul><li>TAX PAYABLE = 15 – 10 = 5 </li></ul>
  19. 19. NET TAX COMPUTATION <ul><li>100 75 50 </li></ul><ul><li>X Y Z </li></ul><ul><li>OUTPUT TAX FOR Y = 75 * 10% =7.5 </li></ul><ul><li>INPUT TAX FOR Y = 100* 10 % = 10 </li></ul><ul><li>INPUT CREDIT = 10 – 7.5 = 2.5 </li></ul>
  20. 20. Input Tax Amount Calculation <ul><li>Month Purchases Gross Value X Rate of Tax </li></ul><ul><li>For ex.: </li></ul><ul><li>Input Tax = 10,00,000 * 0.04 = 40,000/- </li></ul><ul><li>Purchases, includes Trade purchases and Capital Goods purchases as per the existing VAT Rate. </li></ul>
  21. 21. Output Tax Amount Calculation <ul><li>Month Sales X Rate of Tax </li></ul><ul><li>Output Tax = 20,00,000 * 0.04 = 80,000/- </li></ul><ul><li>On the invoice, we should show, Items Amount, VAT Value and Total Value </li></ul><ul><li>In case of discounts, it should be given before VAT. </li></ul>
  22. 22. BOOKS TO BE MAINTAINED <ul><li>Purchase Register </li></ul><ul><li>Sales Register </li></ul><ul><li>URD Register </li></ul><ul><li>Cash Register </li></ul><ul><li>Stock Register </li></ul><ul><li>Labour Register </li></ul><ul><li>Accounting for Works Contract </li></ul>
  23. 23. AUDIT COMPLIANCE <ul><li>Every Dealer whose taxable turnover exceeds 25 lakhs must get his books audited by a practicing Chartered Accountant or by Sales Tax practioners. </li></ul><ul><li>Every company exceeding the above limit has to get their books audited by practicing Chartered Accountant only(normally Statutory Auditor) </li></ul>
  24. 24. DATE OF FILLING THE RETURNS <ul><li>Monthly Sales and Purchases must be filled by every dealer before the 20 th of next month </li></ul><ul><li>Annual returns must be filled before May 31 st </li></ul><ul><li>Audit Report has to be filled before 31 st Dec </li></ul><ul><li>Revised tax returns must be filled before six months from the end of relevant tax period. </li></ul>
  25. 25. FORMS OF VAT <ul><li>FORM NO. </li></ul><ul><li>VAT 1 </li></ul><ul><li>VAT 2 </li></ul><ul><li>VAT 7 </li></ul><ul><li>VAT 10 </li></ul><ul><li>VAT 100 </li></ul><ul><li>VAT 115 </li></ul><ul><li>VAT 240 </li></ul><ul><li>PARTICULARS </li></ul><ul><li>Registration </li></ul><ul><li> Amendment of VAT </li></ul><ul><li>Registration Certificate </li></ul><ul><li>Cancellation of Regt </li></ul><ul><li>Monthly Returns </li></ul><ul><li>Annual Returns </li></ul><ul><li>Audit Report </li></ul>
  26. 26. KINDS OF ASSESSMENT <ul><li>Self Assessment </li></ul><ul><li>Protective Assessment </li></ul><ul><li>Best Judgement Assessment </li></ul><ul><li>Reassessment </li></ul>
  27. 27. Authorities of VAT <ul><li>COMMISSIONER </li></ul><ul><li>DEPUTY COMMISSIONER </li></ul><ul><li>ASSISTANT COMMISSIONER </li></ul><ul><li>STATE REPRESENTAIVE </li></ul><ul><li>COMMERCIAL TAX OFFICERS </li></ul>
  28. 28. GUIDANCE NOTE BY ICAI <ul><li>Input tax paid on purchases of inputs (VAT Credit) should not be included in the cost of purchases </li></ul><ul><li>VAT credit which will be available in future on the goods lying in stock at inception of VAT scheme should be credited to the opening stock Account at the inception of the scheme itself. </li></ul><ul><li>Payment of VAT should not be treated as an expense in the financial statements of the enterprise. </li></ul>
  29. 29. Benefits of VAT <ul><li>No Cascading Effect </li></ul><ul><li>Coverage </li></ul><ul><li>Revenue security </li></ul><ul><li>Selectivity </li></ul><ul><li>Co-ordination of VAT with direct taxation </li></ul>
  30. 30. COMPARITIVE STUDY OF VAT AND CST <ul><li>Multiplicity of levies on different tax base </li></ul><ul><li>Simple to understand </li></ul><ul><li>No Cascading Effect </li></ul><ul><li>Lower Tax rates </li></ul><ul><li>Economic benefit to small industries </li></ul><ul><li>Multiplicity of levies on the same tax base </li></ul><ul><li>Complex structure </li></ul><ul><li>Cascading Effect </li></ul><ul><li>Higher tax rates </li></ul><ul><li>No economic benefit to small industries </li></ul>VAT KST
  31. 31. VAT Revenue <ul><li>VAT implementing states has shown an increase of 27.1 per cent during the first quarter of August 2006 fiscal year-on-year. </li></ul><ul><li>The tax revenue of the VAT implementing states showed around 13.8 per cent increase in 2005-06 over tax revenue of 2004-05, which is higher than the compound annual growth rate of sales tax revenues of these states for last five years. </li></ul>
  32. 32. VAT IN OTHER COUNTRIES <ul><li>ARGENTINA </li></ul><ul><li>BRAZIL </li></ul><ul><li>NEPAL </li></ul><ul><li>CANNADA </li></ul>
  33. 33. VAT IN OTHER COUNTRIES <ul><li>NAME OF COUNTRIES </li></ul><ul><li>Sweden </li></ul><ul><li>Poland </li></ul><ul><li>United Kingdom </li></ul><ul><li>Australia </li></ul><ul><li>Canada </li></ul><ul><li>China </li></ul><ul><li>VATE RATE IN % </li></ul><ul><li>25 </li></ul><ul><li>20 </li></ul><ul><li>17.5 </li></ul><ul><li>8 </li></ul><ul><li>6 </li></ul><ul><li> 17 </li></ul>
  34. 34. <ul><li>In Brazil, in 1968, VAT revenue, as a percentage of total tax revenue was 51.03, while in 1985 it became 21.91, and in the period in between, it gradually fell.  In comparison, income tax rose from 21.8 per cent in 1968 to 58.97 per cent in 1985. </li></ul>
  35. 35. MODEL VAT FOR INDIA <ul><li>One Country One VAT </li></ul><ul><li>CST must be abolished </li></ul><ul><li>Only few Tax Rates </li></ul><ul><li>Only Annual Returns </li></ul><ul><li>Paperless Offices </li></ul><ul><li>Free movement of goods </li></ul><ul><li>All services must be taxed </li></ul>
  36. 36. UK VAT <ul><li>REGISTRATION </li></ul><ul><li>TAX RATES </li></ul><ul><li>FILLING OF RETURNS </li></ul>
  37. 37. <ul><li>THANK YOU </li></ul>
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