what do you mean by VAT & why VAT is necessary?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 usha asked over 3 years ago

what do you mean by VAT?why VAT is necessary? & what is the exact procedure for applying VAT in India?

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6 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered almost 3 years ago

VAT is a sales tax collected by the government (of the state in which the final consumer is located) – which is the government of destination state on consumer expenditure. Over 120 countries worldwide have introduced VAT over the past three decades and India is amongst the last few to introduce it. India already has a system of sales tax collection wherein the tax is collected at one point (first/last) from the transactions involving the sale of goods. VAT would, however, be collected in stages (instalments) from one stage to another.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered about 3 years ago

What is VAT -VAT is a sales tax collected by the government (of the state in which the final consumer is located) – which is the government of destination state on consumer expenditure. -The mechanism of VAT is such that, for goods that are imported and consumed in a particular state, the first seller pays the first point tax, and the next seller pays tax only on the value-addition done – leading to a total tax burden exactly equal to the last point tax. **Why VAT is necessary** India, particularly the trading community, has believed in accepting and adopting loopholes in any system administered by the state or the Centre. If a well-administered system comes in, it will close avenues for traders and businessmen to evade paying taxes. They will also 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 evading taxes. Under the VAT system, no exemptions will be given and a tax will be levied at each stage of manufacture of a product. At each stage of value-addition, the tax levied on the inputs can be claimed back from the tax authorities. -If a well-administered system comes in, it will close avenues for traders and businessmen to evade paying taxes. They will also 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 evading taxes.

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Open uri20170510 32134 18wiosi?1494421711 Manish Kachariya answered over 3 years ago

vat stands for value added tax, it is collected by state govt. and vat is a tax on consumer .it is levy on supplies of goods and services within the State, for consideration, to their customers. there are different procedure in different state procedure submit an application for VAT in Form 1 along with the following documents to the local VAT office: • Central Sales Tax registration certificate(Form A) • Professional tax registration certificate(Form 2) • Copy of important documents such as the address proof, ID proof of the Proprietor/Partner/Director • Four PP size photographs of the Proprietor/Partner/Director • PAN No. & Bank Account No of the Proprietor/Partner/Director • Copy of the rental agreement of the business place • Details of business activities • Partnership deed (in case of a partnership firm) • Memorandum of Association and Articles of Association (in case of a Private Limited company) ii. The authorities from the local VAT office will inspect the premises of where you conduct business within a prescribed time iii. Once the inspection is over, you will have to pay a specified fee to the local office for your VAT registration iv. On payment of the fee, a TIN number will be allotted to you for your business and you will also be given the VAT registration Certificate.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered over 3 years ago

**VAT** V.A.T. is an acronym that stands for Value Added Tax. In essence, it is a tax on the things that we buy. It's a tax on supplies. This is the indirect tax which we have to pay for the consumption of these goods. The tax has to be paid by the original producers or the manufacturers upon the transfer or change in goods. This tax is mainly based on the value of the items or goods and it is associated with the difference in the value added by transferor and does not include profits. In India, VAT got introduced in year 2005 India, particularly the trading community, has believed in accepting and adopting loopholes in any system administered by the state or the Centre. If a well-administered system comes in, it will close avenues for traders and businessmen to evade paying taxes. They will also 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 evading taxes. Under the VAT system, no exemptions will be given and a tax will be levied at each stage of manufacture of a product. At each stage of value-addition, the tax levied on the inputs can be claimed back from the tax authorities. Thanks

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 AZim Hussain Sikder answered over 3 years ago

VAT Each commodity passes through different stages of production and distribution before finally it reaches the Consumer. Some value is added at each stage of the production and distribution chain. Value Added Tax (VAT) is tax on value addition at each stage. Under VAT system, a dealer collects tax on his sales, retains the tax paid on his purchase and pays balance to the Govt. Treasury. It is a consumption tax because it is borne ultimately by the final Consumer. The tax paid by the dealer is passed on to the buyer. It is not a charge on the dealer. Hence, VAT is a multipoint tax system with provision for set off of tax paid on purchases at each point of sale. Why VAT? One of the major pitfalls of the present origin based Sales Tax system is cascading. Since there is no set off of tax paid on purchases, the tax paid on purchases gets embedded in cost price. For example: a Manufacturer purchases inputs / raw materials worth Rs.500.00 and pays tax of Rs.50.00 @ 10%. Since he is not getting input tax credit, he will add Rs.50.00 to the cost of inputs/ raw materials. If he adds Rs.450.00 towards his labour and service and other expenses to produce a commodity using the raw materials/ inputs which also includes his profit (value addition), the value of his product becomes Rs.1000.00. When he sells the product, he collects tax, say Rs.100.00 @ 10%, which contains Rs.50.00 tax collected on value of input which has already been taxed at the time of purchases, Rs.5.00 i.e. tax on tax of Rs.50.00 paid earlier. In this way, there is double taxation and tax on tax, resulting in cascading. The product may also be used as an input for manufacturing another product, further cascading. Cascading increases the cost of production and makes the product uncompetitive. Further, since the existing sale tax system is a tax on sale without provision for set off of tax paid on purchases, it discourages ancillarisation. Ancillarisation means getting most of parts/ components manufactured from outside. To avoid paying tax, the large manufacturers instead of buying parts/ components from outside, manufactures themselves. This discourages the growth of small scale industry and increases concentration of economic power. The system has also an adverse impact on quality of the product, further reducing the competitiveness of the goods. Under VAT system, there is not only provision for set off of tax paid on inputs/ raw materials, but also for capital goods. Input tax credit/ set off of tax paid on purchases eliminate double taxation and cascading, this also reduces the cost of production. Since VAT is a consumption type of tax, the tax load to be borne by the consumer, the goods are exported free of any load of tax in the commodity by way of allowing input tax credit in case of goods sold in course of inter-state trade and commerce and exported out of the country. The goods exported with no load of tax in it can have competitiveness in the market. VAT will create an environment where industry will grow and ultimately help growth of economy.

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Open uri20170510 32134 8wx65y?1494421689 Charan Reddy answered over 3 years ago

What is VAT ----------- VAT is a sales tax collected by the government (of the state in which the final consumer is located) – which is the government of destination state on consumer expenditure. Over 120 countries worldwide have introduced VAT over the past three decades and India is amongst the last few to introduce it. India already has a system of sales tax collection wherein the tax is collected at one point (first/last) from the transactions involving the sale of goods. VAT would, however, be collected in stages (instalments) from one stage to another. The mechanism of VAT is such that, for goods that are imported and consumed in a particular state, the first seller pays the first point tax, and the next seller pays tax only on the value-addition done – leading to a total tax burden exactly equal to the last point tax. Why VAT is necessary -------------------- India, particularly the trading community, has believed in accepting and adopting loopholes in any system administered by the state or the Centre. If a well-administered system comes in, it will close avenues for traders and businessmen to evade paying taxes. They will also 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 evading taxes. Under the VAT system, no exemptions will be given and a tax will be levied at each stage of manufacture of a product. At each stage of value-addition, the tax levied on the inputs can be claimed back from the tax authorities. At a macro level, there are two issues, which make the introduction of VAT critical for India. Industry watchers say that the VAT system, if enforced properly, forms part of the fiscal consolidation strategy for the country. It could, in fact, help address the fiscal deficit problem and the revenues estimated to be collected could actually mean lowering of the fiscal deficit burden for the government. The International Monetary Fund, in its semi-annual World Economic Outlook released on April 9, expressed its concern over India's large fiscal deficit – at 10 per cent of the GDP. Further any globally accepted tax administrative system, will only help India integrate better in the World Trade Organisation regime.

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Name commented over 1 year ago

Very nice & simple explaination

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