Final Tax Ppt

8/2/2019 Final Tax Ppt

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Presented by -

VALUE ADDED TAX


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VAT

VAT is a multi-stage tax that is levied on goodsacross each stage of transaction

tax paid at each stage of Value addition

tax reform measure to abolishes the doubletaxation system in India

Consumption tax

Provision of a threshold limit for registration ofVAT


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Why VAT?

Cascading effect

Reduction tax burden

Reduction in price level


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Special Cases Of Levy and Collection

1.) No Tax: small dealer with gross annual turnovernot exceeding the specified limit are not liable to

pay tax.

2.)Compounded Rate Of Tax: Has an option to paytax at small percentage ,Composition scheme.


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Advantages of VAT Over Sales Tax

1.) Simple and self operative.

2.)Uniformity

3.)Transparent and Progressive system

4.) Self administration

5.) Larger Tax base

6.) Dealer, an agent, for collection and payment of

tax to government.


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HOW VAT OPERATES?

Rs. 100 @12.5%

A

VAT=112.50-100

VAT=Rs. 12.5

B Rs.160,@12.5% VAT=20-12.5

VAT=Rs. 7.5

C


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VAT AT EACH POINT OF SALE

Dealer

1

Purchase

power

2

Value

Addition

3

Sales

Price

4(2+3)

VAT @

10% of 4

5

Total

(4+5)

6

Set off

7

Net tax

paid(5-7)

8

Manufacturer

0 100 100 10 110 0 10

Distributor

100 50 150 15 165 10 5

Whole

seller150 50 200 20 220 15 5

Retail to

Consumer200 60 260 26 286 20 6


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VAT CALCULATED ON SALES

PRICE

VAT is chargeable on sale price

VAT is calculated on Rs.57,500/- and not on Rs.50,000.

Cost of 500 units @100/- per unit 50,000

Excise duty 5,000

Octroi Duty 1,000

Packing and Forwarding 1,500

Total 57,500


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VARIANTS OF VATVALUE ADDED TAX


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THREE VARIANTS

VALUE ADDED TAX

GROSS PRODUCT VARIANT

NO SET OFF ON CAPITAL ASSETS

INCOME VARIANTNO SET OFF ON CAPITAL ASSETS BUT DEPRECIATION ALLOWED ASDEDUCTION

CONSUMPTION VARIANT

SET OFF ON CAPITAL ASSETS BUT DEPRECIATION NOT ALLOWED ASDEDUCTION

1

2

3


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VARIANT

VALUE ADDED TAX

Calculating Tax Liability

Particulars Amount Tax

Local Sales @ 12.5% 35,00,000 4,37,500

Local sales @ 4% 10,00,000 40,000

Interstate Sales @ 4% 20,00,000 80,000

Local Purchases @ 12.5% 25,00,000 (3,12,500)

Local Purchases @ 4% 10,00,000 (40,000)

Plant Purchased @ 12.5% 50,00,000 6,25,000

Depreciation on Plant @

15%7,50,000 7,50,000

TOTAL VAT

PAYABLE1,25,000

Note: Any tax paid on inter-state purchases is not available for set-off


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INCOME VARIANT

VALUE ADDED TAX



Local Sales @ 12.5% 35,00,000 4,37,500

Local sales @ 4% 10,00,000 40,000


Local Purchases @ 12.5% 25,00,000 (3,12,500)

Local Purchases @ 4% 10,00,000 (40,000)

Plant Purchased @ 12.5% 50,00,000 6,25,000


15%7,50,000 (7,50,000)

TOTAL VAT

PAYABLE(6,25,000)

Note: One can set-off inter-state sales tax liability against the Refund


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VARIANT

VALUE ADDED TAX



Local Sales @ 12.5% 35,00,000 4,37,500

Local sales @ 4% 10,00,000 40,000


Local Purchases @ 12.5% 25,00,000 (3,12,500)

Local Purchases @ 4% 10,00,000 (40,000)

Plant Purchased @ 12.5% 50,00,000 (6,25,000)


15%7,50,000 7,50,000

TOTAL VAT

PAYABLE(5,00,000)

Note: Set-off only for the asset which is put to use in the Current Year


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Methods of Calculation of VAT

1) Addition Method

2) Invoice Method

3) Subtraction Method


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1) ADDITION METHOD (Mainly used with Income variant of VAT)

Cost of raw materials 100,000

Direct Expenses 50,000

Administration expenses 15,000

Selling & Distribution Expenses 12,500

Financial Expenses 8,500

Profit 14,000

Total Sales Price 200,000

VAT Payable @ 12.5% on 200,000 25,000


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2) INVOICE METHOD

VAT Liability Less Input Credit Tax Payable

Manufacturer/ First seller in the state sells

goods to distributors for Rs. 5000

VAT is 12.5%

625 0 625

Distributor sells goods to Wholesale Dealer at

Rs. 5,500VAT @ 12.5% will be

688 625 63

Wholesale Dealer sells goods to Retailer at

Rs. 7000

VAT @ 12.5% will be

875 688 187

Now Retailer sells goods to consumer at

Rs. 8000 VAT @ 12.5%1000 875 125

TOTAL 3188 2188 1000


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3) SUBTRACTION METHOD

Tax = T x R T = Taxable Turnover (Inclusive of VAT)

100 + R R = Rate of Tax

Taxable Turnover

(Inclusive of VAT)VAT Tax @ 12.5%

Manufacturer sells to

Distributors at Rs. 5000 and

VAT rate is 12.5% 5000 x 12.50 = 555.55

5000 555.55

100 + 12.50

Distributors sells the goods

to Whole seller at Rs. 5750750 x 12.50 = 83.33

750 83.33

100 + 12.50

Whole seller sells to retailerat Rs. 6350 600 x 12.50 = 66.66

600 66.66

100 + 12.50

Retailer sells to Consumer

at Rs. 8500 2150 x 12.50 = 238.882150 238.88

100 + 12.50

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