final tax ppt
TRANSCRIPT
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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
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
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
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
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