Brief History Background Indirect Tax Structure in India VAT - A Roadmap to GST VAT- Current scenario VAT- Applicability Rate of Tax Input Tax Credit Other procedural aspects Central Sales Tax

•Introduced in Morocco in the year 1962•Followed by Brazil, Denmark, France and Germany during 1967-68•Implemented in many countries during the 1980’s•Presently in more than 123 countries•US still working under the sales tax regime•Haryana introduced VAT, w.e.f. 1 April 2003, Most other States on 1 April 2005, U.P. still a non VAT State

Value Added Tax is a:Multi-point taxationTax only on Value addition through Invoice

methodA state subject

Import of goods – Duties of Custom Manufacture of goods – Excise (CENVAT) Sale of goods – VAT/ Sales Tax/ Central Sales

Tax Entry of goods in the State / Territorial Limit -

Entry Tax / Octroi Rendering of taxable services - Service Tax Heavy cumulative burden of Indirect taxes

Phase - I Single point tax with multiple rate of taxes without any

provision of set offPhase - II Multipoint taxation with provision of set off known as

VATProposed Levy of service tax on specified services by the States Uniformity of rates Abolishing CST in a phased manner Arriving at a consensus rate of Goods & services Implementation of GST ( Goods and Service Tax) by 1

April 2010

In most of the States Implemented from 1 April 2005, other States joined later

U.P. still not under the VAT Taxes abolished

Turnover tax, Re-sale tax, Surcharge, Special Additional Tax etc.

Entry Tax Has been made Vatable Entry tax in lieu of Octroi - not Vatable

Central Sales TaxTo be abolished by 2010

VAT not levied on Inter-state sale / Inter-state branch transfer Imports

0% VAT rate on Exports

No specific rate of VAT on liquor, petrol, diesel, aviation turbine fuel

Uniformity in RatesExempt Rate - 0% on 46 commodities consisting

of natural and unprocessed products like-

Firewood, Plants, GarlicItems legally barred from taxation like - News

papers, Electricity energyitems having social implications like- salt, life

saving drugsSpecial Rate - 1%

Gold and silver ornaments

Uniformity in RatesEssential/Mass Consumption Rate - 4%

270 goods comprising basic necessities andAgricultural and industrial inputs; IT related goods medicines and drugs;capital goods; Iron, Aluminum, Copper, zinc etc.

Revenue Neutral Rate - 12.5 %

Type of Contract Abatement under VAT Abatement under Services tax

Installation & Errection 15% 67%

Civil Construction 25% 67&

• Specific provisions related to tax on Works Contract– Bifurcation of goods and services– Specific rate of deductions

• VAT credit in case of Capital Goods – Available but to be adjusted over a period of

three years or specified period– Not available on Capital Goods specified in

negative list like Cars, Air Conditioners etc. • VAT Credit refunded within three months in case of

exports where turnover is above Rs.5 Crore

• VAT credit available only in case of :– Taxable intra State sales– Taxable inter-state sales– Export out of India– In case inter state stock transfer -VAT

credit to be reduced • In case of goods specified in the IInd schedule – 100% ( 1%)• In case of goods specified in the IIIrd schedule – 100% ( 4%)• In case of goods specified in the Ivth schedule – 20% ( 20%)

• VAT Credit not available in following cases: – Inputs used in the manufacture of exempted

goods– Purchases for other than manufacture/ re-sale– Purchases made inter State/ in-transit – Purchases of goods of negative list

• Delhi - Fuel in the form of Petrol, Diesel and Kerosene, LPG, CNG, Coal

• AP - Fuel, Coal and Natural Gas used for power generation

• Jharkhand - Consumables• Tripura – Credit available in excess of 4% on

petroleum products (other than petrol, ATF and diesel) and other fuels

• Different rate of VAT on Petroleum products – Delhi 20%, M.P. – 29%, Gujarat – 24% ~ 38%

• List of goods eligible to VAT @4% not uniform for all the States for example Ornaments made of rolled gold and imitation gold are eligible to VAT @4% in M.P. whereas in Delhi chargeable to VAT @12.5%

• Applicability of VAT on Deemed Exports– No specific exemption, methodology of payment

of tax and refund.

• Tax on inter state sale of goods • Tax collected by the State where movement of

goods commences • No tax on

– Stock transfer/ branch transfer – In transit sales– Sale in the course of imports– Export sale

• RATE Of CST– Sale to registered dealer for manufacture, resale or

used Telecommunication network, Mining, electricity generation/ distribution – 4%.

– Sale to Government – 4%.– Others not covered by above

– Declared goods twice the rate applicable in the State – 8%

– Others- higher of 10% or Sales Tax/ VAT applicable

– No CST if goods generally exempt from VAT/ Sales tax