Value Added Tax 2007
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Transcript of Value Added Tax 2007
VALUE ADDED TAX
AAPresentation byPresentation by
Santosh. BMBA STUDENT – 2007 Batch
PSG INSTITUTE OF MANAGEMENT, TAMIL NADU
India’s Biggest Tax Reforms in the last 50 years…
What is Value Added Tax (VAT) ? Invented by French Economist - 1954
India - April 1, 2005 - states and Union Territories
Transparent Tax Collected on sale of goods
Applies for all manufacturers, wholesalers, retails
VAT Chain - Its does away with Tax on Tax
Consumer pays less - compared to Sales Tax
Problems with Sales Tax
Rates of VAT
• Two basic rates
• A low rate of 4% on specified goods
• 12.5% for all other goods not specified elsewhere
• Three special rates
• 1% for Jewellery, precious stones & Metals
• 0% for Goods of local importance & Exports
• 20% for liquor (Floating Rates)
VAT Applicability
Below 5 Lakhs turnover
– No Tax & No Registration required.
Between 5 and 50 Lakhs
– VAT/Composition scheme (optional)
Above 50 Lakhs
– VAT is compulsory.
Registering / De - Registering
Application form – Basic Details of the business
Partnership/Limited company – MOA attached
A number of Encloses attached
Display of Registration certificate-office premises
Turnover falls below 5lakhs-De-Registering
Calculation of VAT
Input Tax-Tax Charged on purchase bills
(Monthly Purchase value x Rate of Tax)
Output Tax-Tax charged on Taxable sales of goods (Month Sales X Rate of Tax)
Input Tax > Output Tax ; Tax Credit = Input Tax-Output Tax
Tax Paid = Output Tax – (Input Tax + Tax Credit )
ILLUSTRATION
Few points on VAT
On the invoice-Items Amount, VAT Value and Total Value
Discounts shown before VAT
Not paid by 20th every month - 5000/- penalty
Assessment made-Tax paid / Return filed by the dealer
Return accepted-verifying the documents attached
Audit of select cases
Issues on Implementation No handbooks on VAT provisions/rules/procedures
Deferral of introduction of state VAT
Awareness-businesses and consumers
Lack of political support/Strikes by traders
Excise to check evasion
Misuse of VAT
Current Happenings Punjab 39%, Maharashtra 9.2%, Kerala 6.2%, AP 12%, Delhi 29% Impact of VAT in Andhra Pradesh – 2005-07
Maharashtra tops list of 7 States in VAT collections VAT exemption for tobacco products hailed
Delhi - States revenue growth rate slips to 22.4% VAT collections register 17% growth in West Bengal
Removal of VAT on copra hailed – Kerala Traders refuse to sell Cigarettes – Kerala
Revenue from VAT below expectations in TN UP-Mayawati government's decision
Conclusion Better control than previous tax system
Increase in Government Revenue
More Funds – Development of India
Increases Single common Market in India
Decrease in Pricing/No Declaration forms
Demand for consumerable goods will go up• Industries Produces more – Business Expansion• World market – Higher Exports –Business Expansion
Tremendous Job opportunities
References:
• The White Paper – By The Honorable Finance Minister• Three Sixty Magazine – Vol 5; Feb 14, 2005• World Tobacco – issue 219; May 2007• How T o Deal With VAT – Kul Bhushan• Indian Economy – UPSC Book• Economic Times 1.Feb 19,2007 2.Mar 23,2007 3.July 26,2007 4.Oct 10,2007 5.Oct 20,2007 6.Oct 21,2007 7. Oct 24,2007