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8/9/2019 VAT Robby Nair
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VAT
(1ST April 2005)
Robby Nair
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What is VAT
Value Added Tax (VAT) is a generalconsumption tax that is assessed on the valueadded to goods & services. It is the indirecttax on the consumption of the goods, paid by
its original producers upon the change ingoods or upon the transfer of the goods to itsultimate consumers. It is based on the valueof the goods, added by the transferor. It is the
tax in relation to the difference of the valueadded by the transferor and not just a profit.
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Meaning
It means every seller of goods and serviceproviders charges the tax after availing theinput tax credit. It is the form of collectingsales tax under which tax is collected in each
stage on the value added of the goods. VAT is a multi-stage tax, levied only on value
that is added at each stage in the cycle ofproduction of goods and services with the
provision of a set-off for the tax paid atearlier stages in the cycle/chain.
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Mechanism
Old system VAT
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Difference between VAT andCST Under the CST Act, the tax is collected at
one stage of purchase or sale of goods.Therefore, the burden of the full tax bond
is borne by only one dealer, either thefirst or the last dealer. However, underthe VAT system, the tax burden would beshared by all the dealers from first to last
VAT considers intra sales whereas CSTconsiders inter state sales
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The VAT schemes- for goodstaxable under VAT
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Who has to apply forregistration Proprietor
Partner in case of partnership
Karta HUF
Directors and authorized persons in case of COs
When business is to be sold , discontinued,transferred in case of death, amalgamation, sale-fresh registration applied for
Amendment of the registration certificate when
more goods are to be induced to the business
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Records to be maintainedunder VAT
Purchase bills
Sale bills
Record of exempted sale Debit and credit notes
Details of goods manufactured
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Goods exempted from Vat
Liquor
Lottery tickets
Petrol/ diesel/ ATF and motor spirit Newspapers, stocks and shares,
actionable claims
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Why VAT
Advantages
Coverage
Revenue Security Selectivity
Co-ordination ofVAT with directtaxation
Transparency
Computerization
Disadvantages
Impact on GDP ratio
Less revenue to thegovernment
Complexity in therefund procedure
Multiple rates of tax
Maintenance ofdifferent records
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VAT in Punjab
Rates Items covered
0% Goods legally barred from taxation eg.NewspaperGoods of social implication eg. Book,periodicals, slate and pencil.Natural and unprocessed goods eg. Betelnuts, earthen pots etc.
4% Goods of necessities(such as bread , butter,drugs, paper), capital goods, declaredgoods(such as iron and steel, hide and skinetc) and industrial and agricultural inputs
12.5 % Revenue neutral rate is fixed on other goodswith floor rate of 10%
Exempted rates 1% floor rate shall be applicable to gold,silver, precious and semi precious stones.20% floor rate shall be applicable to liquorPetrol, diesel and ATF will be out of VATregimeSpecial rates of 22%, 27.5% and 20% on fewgoods