Vat regime in india


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Vat regime in india

  1. 2. <ul><li>Brief History </li></ul><ul><li>Background </li></ul><ul><li>Indirect Tax Structure in India </li></ul><ul><li>VAT - A Roadmap to GST </li></ul><ul><li>VAT- Current scenario </li></ul><ul><li>VAT- Applicability </li></ul><ul><li>Rate of Tax </li></ul><ul><li>Input Tax Credit </li></ul><ul><li>Other procedural aspects </li></ul><ul><li>Central Sales Tax </li></ul>
  2. 3. <ul><li>Introduced in Morocco in the year 1962 </li></ul><ul><li>Followed by Brazil, Denmark, France and Germany during 1967-68 </li></ul><ul><li>Implemented in many countries during the 1980’s </li></ul><ul><li>Presently in more than 123 countries </li></ul><ul><li>US still working under the sales tax regime </li></ul><ul><li>Haryana introduced VAT, w.e.f. 1 April 2003, Most other States on 1 April 2005, U.P. still a non VAT State </li></ul>
  3. 4. <ul><li>Value Added Tax is a: </li></ul><ul><ul><li>Multi-point taxation </li></ul></ul><ul><ul><li>Tax only on Value addition through Invoice method </li></ul></ul><ul><ul><li>A state subject </li></ul></ul>
  4. 5. <ul><li>Import of goods – Duties of Custom </li></ul><ul><li>Manufacture of goods – Excise (CENVAT) </li></ul><ul><li>Sale of goods – VAT/ Sales Tax/ Central Sales Tax </li></ul><ul><li>Entry of goods in the State / Territorial Limit - Entry Tax / Octroi </li></ul><ul><li>Rendering of taxable services - Service Tax </li></ul><ul><li>Heavy cumulative burden of Indirect taxes </li></ul>
  5. 6. <ul><li>Phase - I </li></ul><ul><li>Single point tax with multiple rate of taxes without any provision of set off </li></ul><ul><li>Phase - II </li></ul><ul><li>Multipoint taxation with provision of set off known as VAT </li></ul><ul><li>Proposed </li></ul><ul><li>Levy of service tax on specified services by the States </li></ul><ul><li>Uniformity of rates </li></ul><ul><li>Abolishing CST in a phased manner </li></ul><ul><li>Arriving at a consensus rate of Goods & services </li></ul><ul><li>Implementation of GST ( Goods and Service Tax) by 1 April 2010 </li></ul>
  6. 7. <ul><li>In most of the States Implemented from 1 April 2005, other States joined later </li></ul><ul><li>U.P. still not under the VAT </li></ul><ul><li>Taxes abolished </li></ul><ul><ul><li>Turnover tax, Re-sale tax, Surcharge, Special Additional Tax etc. </li></ul></ul><ul><li>Entry Tax </li></ul><ul><ul><li>Has been made Vatable </li></ul></ul><ul><ul><li>Entry tax in lieu of Octroi - not Vatable </li></ul></ul><ul><li>Central Sales Tax </li></ul><ul><ul><li>To be abolished by 2010 </li></ul></ul>
  7. 8. <ul><li>VAT not levied on </li></ul><ul><ul><li>Inter-state sale / Inter-state branch transfer </li></ul></ul><ul><ul><li>Imports </li></ul></ul><ul><li>0% VAT rate on Exports </li></ul><ul><li>No specific rate of VAT on liquor, petrol, diesel, aviation turbine fuel </li></ul>
  8. 9. <ul><li>Uniformity in Rates </li></ul><ul><ul><li>Exempt Rate - 0% on 46 commodities consisting of </li></ul></ul><ul><ul><ul><ul><li>natural and unprocessed products like- Firewood, Plants, Garlic </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Items legally barred from taxation like - News papers, Electricity energy </li></ul></ul></ul></ul><ul><ul><ul><ul><li>items having social implications like- salt, life saving drugs </li></ul></ul></ul></ul><ul><ul><li>Special Rate - 1% </li></ul></ul><ul><ul><ul><li>Gold and silver ornaments </li></ul></ul></ul>
  9. 10. <ul><li>Uniformity in Rates </li></ul><ul><ul><li>Essential/Mass Consumption Rate - 4% </li></ul></ul><ul><ul><ul><li>270 goods comprising basic necessities and </li></ul></ul></ul><ul><ul><ul><ul><li>Agricultural and industrial inputs; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>IT related goods </li></ul></ul></ul></ul><ul><ul><ul><ul><li>medicines and drugs; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>capital goods; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Iron, Aluminum, Copper, zinc etc. </li></ul></ul></ul></ul><ul><ul><li>Revenue Neutral Rate - 12.5 % </li></ul></ul>
  10. 11. <ul><li>Specific provisions related to tax on Works Contract </li></ul><ul><ul><li>Bifurcation of goods and services </li></ul></ul><ul><ul><li>Specific rate of deductions </li></ul></ul>Type of Contract Abatement under VAT Abatement under Services tax Installation & Errection 15% 67% Civil Construction 25% 67&
  11. 12. <ul><li>VAT credit in case of Capital Goods </li></ul><ul><ul><li>Available but to be adjusted over a period of three years or specified period </li></ul></ul><ul><ul><li>Not available on Capital Goods specified in negative list like Cars, Air Conditioners etc. </li></ul></ul><ul><li>VAT Credit refunded within three months in case of exports where turnover is above Rs.5 Crore </li></ul>
  12. 13. <ul><li>VAT credit available only in case of : </li></ul><ul><ul><li>Taxable intra State sales </li></ul></ul><ul><ul><li>Taxable inter-state sales </li></ul></ul><ul><ul><li>Export out of India </li></ul></ul><ul><ul><li>In case inter state stock transfer -VAT credit to be reduced </li></ul></ul><ul><ul><ul><li>In case of goods specified in the IInd schedule – 100% ( 1%) </li></ul></ul></ul><ul><ul><ul><li>In case of goods specified in the IIIrd schedule – 100% ( 4%) </li></ul></ul></ul><ul><ul><ul><li>In case of goods specified in the Ivth schedule – 20% ( 20%) </li></ul></ul></ul>
  13. 14. <ul><li>VAT Credit not available in following cases: </li></ul><ul><ul><li>Inputs used in the manufacture of exempted goods </li></ul></ul><ul><ul><li>Purchases for other than manufacture/ re-sale </li></ul></ul><ul><ul><li>Purchases made inter State/ in-transit </li></ul></ul><ul><ul><li>Purchases of goods of negative list </li></ul></ul><ul><ul><ul><li>Delhi - Fuel in the form of Petrol, Diesel and Kerosene, LPG, CNG, Coal </li></ul></ul></ul><ul><ul><ul><li>AP - Fuel, Coal and Natural Gas used for power generation </li></ul></ul></ul><ul><ul><ul><li>Jharkhand - Consumables </li></ul></ul></ul><ul><ul><ul><li>Tripura – Credit available in excess of 4% on petroleum products (other than petrol, ATF and diesel) and other fuels </li></ul></ul></ul>
  14. 15. <ul><li>Different rate of VAT on Petroleum products </li></ul><ul><ul><li>Delhi 20%, M.P. – 29%, Gujarat – 24% ~ 38% </li></ul></ul><ul><li>List of goods eligible to VAT @4% not uniform for all the States for example Ornaments made of rolled gold and imitation gold are eligible to VAT @4% in M.P. whereas in Delhi chargeable to VAT @12.5% </li></ul><ul><li>Applicability of VAT on Deemed Exports </li></ul><ul><ul><li>No specific exemption, methodology of payment of tax and refund. </li></ul></ul>
  15. 16. <ul><li>Tax on inter state sale of goods </li></ul><ul><li>Tax collected by the State where movement of goods commences </li></ul><ul><li>No tax on </li></ul><ul><ul><li>Stock transfer/ branch transfer </li></ul></ul><ul><ul><li>In transit sales </li></ul></ul><ul><ul><li>Sale in the course of imports </li></ul></ul><ul><ul><li>Export sale </li></ul></ul>
  16. 17. <ul><li>RATE Of CST </li></ul><ul><ul><li>Sale to registered dealer for manufacture, resale or used Telecommunication network, Mining, electricity generation/ distribution – 4%. </li></ul></ul><ul><ul><li>Sale to Government – 4%. </li></ul></ul><ul><ul><li>Others not covered by above </li></ul></ul><ul><ul><ul><li>Declared goods twice the rate applicable in the State – 8% </li></ul></ul></ul><ul><ul><ul><li>Others- higher of 10% or Sales Tax/ VAT applicable </li></ul></ul></ul><ul><ul><li>No CST if goods generally exempt from VAT/ Sales tax </li></ul></ul>