I TAKE IMMENSE PLEASUR IN THANKING MY TEACHER Mrs. NAME OF YOUR TEACHER AS WELL AS MY PRINCIPAL Mrs. NAME OF YOUR PRINCIPAL FOR HAVING PERMITTED ME TO CARRY OUT THIS PROJECT ON THE TOPIC STUDYING THE IDEA OF VAT IN INDIA . I WISH TO EXPRESS MY DEEP SENSE OF GRATITUDE TO MY TEACHER FOR HER ABLE GUIDANCE AND USEFUL SUGGESTIONS , WHICH HELPED ME IN COMPLETING THE PROJECT WORK IN TIME . SHE HAD BEEN A SOURCE OF INSPIRATION AND FOR HIS TIMELY GUIDANCE IN THE CONDUCT OF MY PROJECT WORK . FINALLY , YET IMPORTANTLY , I WOULD LIKE TO EXPRESS MY HEARTFELT THANKS TO MY BELOVED PARENTS FOR THEIR BLESSINGS.

1.INTRODUCTION TO VAT2. MEANING OF VAT 3. NECESSITY OF VAT IN INDIA4. ADVANTAGE OF VAT 5. DISADVANTAGE OF VAT6. ITEMS COVERED IN INDIAN VAT7. IMPORT OF VAT IN INDIA 8. QOUTES FOR VAT IN INDIA 9. EXAMPLES TO COMPUTE VAT 10. RATE OF VAT

A VALUE ADDED TAX (VAT) IS A FORM OF CUMSUMPTION TAX. FROM THE PERSPECTIVE OF THE BUYER IT IS A TAX ON PURCHASE PRICE . FROM THAT OF THE SELLER , IT IS A TAX ONLY ON THE VALUE ADDED TO PRODUCT , MATERIAL , OR SERVICE , FROM AN ACCOUNTING VIEW , BY HIS OF ITS MANUFACTURE OR DISTRIBUTION . THE BUYER REMITS TO THE GOVERNMENT THE DIFFERENCE BETWEEN THESE 2 AMOUNTS , AND RETAINS THE REST FOR THEMSELVES TO OFFSET THE TAXES HE HAD PREVIOUSLY PAID ON THE INPUTS .THE “ VALUE ADDED “ TO A PRODUCT BY A BUSINESS IS THE SALE PRICE CHARGED TO ITS CUSTOMERS , MINUS THE COST OF MATERIALS AND OTHER TAXABLE INPUTS. A VAT IS LIKE A SALES TAX IN THAT ULTIMATELY ONLY THE END CONSUMER IS TAXED.

MAURICE LAURE , JOINT DIRECTOR OF THE FRENCH TAX AUTHORITY , WAS THE FIRST TO INTRODUCE VAT ON APRIL 10,1954 , ALTHOUGH GERMAN INDUSTRIALIST DR. WILHELM VON SIEMENS PRPOSED THE CONCEPT IN 1918.

INDIA , PARTICULARLY THE TRADING COMMUNITY , HAS BELIEVED IN ACCEPTING AND ADOPTING LOOPHOLES IN ANY SYSTEM ADMINISTRATED BY THE STATE OR THE CENTRAL . IF A WELL ADMINISTRATED SYSTEM COMES IN IT WILL CLOSE AVENUES FOR TRADERS AND BUSINESS MEIN TO EVADE PAYING TAXES . THEY WILL ASLO BE COMPELLED TO KEEP PROPER RECORDS OF THEIR SALES AND PURCHASES .

MANY SECTIONS HOLD THE VIEW THAT THE TRADING COMMUNITY HAS BEEN AMONGST THE BIGGEST OFFENDERS WHEN IT COMES TO ERADING TAXES .

UNDER THE VAT SYSTEM , NO EXEMPTIONS WILL BE GIVEN AND A TAX WILL BE REVIED AT EACH STAGE OF MANUFACTURER OF A PRODUCT . AT EACH STAGE OF VALUE ADDITION , THE TAX LEVIED ON THE INPUTS CAN BE CLAIMED BACK FROM THE TAX AUTHORITIES .

COVERAGE :- IF THE TAX IS CARRIED THROUGH THE RETAIL LEVEL , IT OFFERS ARE THE ECONOMIC ADVANTAGES OF TAX THAT INCLUDES THE ENTIRE RETAIL PRICE WITHIN ITS SCOPE . AT THE SAME TIME THE DIRECT PAYMENT OF THE TAX IS SPREAD OUT AND OVER A LARGE NO OF FIRMS INSTEAD OF BEING CONCERNTRATED ON PARTICULAR GROUPS , SUCH AS WHOLE SALER OR RETAILER .

SELECTIVITY :- VAT MAY BE SELECTIVELY APPLIED TO SPECIFIC GOODS OR BUSINESS ENTITIES. WE HAVE ALREADY ADDRESSED ESSENTIAL GOODS AND SMALL BUSINESS . IN ADDITION THE VAT DOES NOT BURDEN CAPITAL GOODS BECAUSE THE CONSUMPTION TYPE VAT PROVIDES A FULL CREDIT FOR THE TAX INCLUDED IN PURCHASES OF CAPITAL GOODS .

VAT IS REGRESSIVE :- IT IS CLAIMED THAT THE TAX IS REGRESSION , ie ITS BURDEN FALLS DISPRPORTIONATELY ON THE POOR ARE LIKELY TO SPEND MORE OF THEIR INCOME THAN THE REALITVELY RICH PERSON . THERE IS MERIT IN THIS ARGUMENT , PARTICULARLY IF IT ATTEMPTS TO REPLACE DIRECT OR INDIRECT TAXES WITH STEEP , PROGRESSIVE RATES . HOWEVER , OBSERVATION FROM AROUND THE WORLD AND EVEN GUYANA HAS SHOWN THAT STEEP TAX RATES LEAD TO EVATION , NAD IN THE CASE OF INCOME TAX ACT AS A DISTINCTIVE OF EFFORT .

VAT FAVOURS THE CAPITAL INTENSIVE FIRM :- IT IS ALSO ARGUED THAT VAT PLACES A HEAVY DIRECT IMPACT OF TAX ON THE LABOUR INTENSIVE FIRM COMPARED TO CAPITAL INTENSIVE COMPETITOR .

ALL BUSINESS TRANSACTIONS CARRIED ON WITHIN A STATE BY INDIVIUALS , PARTNERSHIPS , COMPANIES ETC . WILL BE COVERED BY VAT

1.DELHI HAS IMPOSED VAT ON DIESEL AT 20 % WHICH IS HIGHER THAN THE 12 % . SALES TAX CHARGED EARLIER . IT HAS IMPOSED VAT ON LPG AT 12.5 % WHICH ALSO HIGHER THAN THE PREVIOUS SALES TAX RATE OF 8 %. 2. MORE THAN 550 ITEMS WOULD BE COVERED UNDER THE NEW INDIAN VAT REGIME OF WHICH 46 NATURAL AND UNPROCESSED LOCAL PRODUCTS WOULD BE EXEMPT FROM VAT .3. ABOUT 270 ITEMS INCLUDING DRUGS , MEDICINES , AGRICULTURAL INPUT , CAPITAL GOODS & DECLARED GOODS WOULD ATTRACT 4% VAT IN INDIA . 4. THE REMAINING ITEMS WOULD ATTRACT 12.5 % VAT . 5. TEA PRODUCING STATES WOULD BE GIVEN AN AOPTION TO VARY 12.5 % - 4 % SUBJECT TO REVIEW 2006 .

VAT IS USUALLY ARRESSED ON GOODS THAT ARE IMPORTED TO EUROPE AND OTHER COUNTRIES THAT HAVE A VAT SYSTEM . THE NORTH AMERICA COMPANY MAY GET A VAT CHARGE ON AN INVOICE FROM A FRIEGHT FORWARDER , SUCH AS FEDERAL EXPRESS OR UPS .

THE VAT CAN OFTEN BE REFUNDED . EURO VAT CAN ASSIST IN IDENTIFYING THE VAT CHARGE . AND THEN DETERMINE THE BEST METHOD TO RECLAIM THE VAT .

EUROVAT ALSO ASSISTS IN SETTING UP PROCESSES AND LOGISTICS FOR CONTINUING SHIPMENTS , AS WELL AS INSTRUMENTS FOR HOW TO ISSUE THE SHIPPING DOCUMENTS IN ORDER TO MAXIMIZE THE VAT REFUNDS AND MINIMIZE VAT ISSUES .

COMPUTE THE VAT AMOUNT PAYABLE BY Mr. SHYAM , WHO PURCHASED GOODS FROM A MANUFACTURE ON PAYMENT OF Rs 4,16,000 ( INCLUDING VAT ) AND EARNED 20% PROFIT ON PURCHASES PRICE . VAT RATE ON BOTH PURCHASES AND SALES IS 4 % .

NET PURCHASES PRICE INS RS 4,10,000 PROFIT - RS 80000 , SELLING PRICE - RS 4,80,000 , VAT ON SELLING PRICE IS @4% - RS 19200 , VAT PAID ON PURCHASES - RS 16000 . NET VAT PAYABLE BY CASH RS 3000 ( WHICH IS 4% OF VALUE ADDED OF RS 80000.

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