value added tax

WelcomeTo The

Presentation Of

V .A. T.Presented to:Dr. H. Rathod

Presented by:Sachin Ghulyani B-12Gopi Gosai B-13

Hiral Panchal B-32Amit Gurav B-14

Dt: 30/12/2009

Summary

• What is VAT

• History

• Why a change in TAX system

• How does VAT affect India.

• Advantages and disadvantages of VAT

• Conclusion

Day to Day example of VAT

Nokia 5800 Rs.14000

V.A.T @ 12.5%

(Rs.1750)Rs.15750

What is VAT???

• Value Added Tax is a multi point sales tax with set off for tax paid on purchases.

• It is basically a tax on the value addition on the product.

• TAX is the money that people have to pay the government, which is used to provide public services.

• And also the money collected has become an instrument of fiscal policy to stimulate economic growth and to maintain economic stability in the country

History in India

States Date No.

Haryana 01-04-2003 1

A.P, W.B, Kerala, Karnataka, Orissa, Delhi, Tripura, Bihar, Arunachal Pradesh, Sikkim, Punjab, Goa, Mizoram, Nagaland,

J & K, Manipur, Maharashtra, Himachal Pradesh, Assam & Meghalaya

01-10-2005 20

Uttaranchal 01-04-2006 1

Rajasthan, Gujarat, MP, Chhattisgarh and Jharkhand

01-04-2006 4

Uttar Pradesh and Tamil Nadu

WHY - A - NEW - TAX - SYSTEM?

There are seven significant

reasons to reform the tax system

1. The current system was too complex

7 Reasons

2. It got too easily exploited by political reasons

3.It created a poor economic impact

7 Reasons

4.It was a bureaucracy Out of control

5. VAT requires a large number of professionals

6. VAT forces business managers to make decisions based on tax implications rather than good business

7 Reasons

7 Reasons

7. It was inefficient

Sales Tax VAT• It 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 the first or the last dealer.

• The tax burden would be shared by all the dealers from first to last. Then, such tax would be passed upon the final consumers.

• It is levied at a single point • The retailers are not subject to tax except for the retail tax.

How do Sales Tax and VAT differ???

RATES OFVAT ITEMS

0%

Natural and un-processed produces in unorganized sectorGood of social importanceLife saving drugsNewspapersNational flag barred from taxation

1%

GoldSilverPrecious and semi-precious stones

4%

Basic necessitiesIndustrial and agricultural inputsDeclared goodsMedicines and drugsAED itemsCapital goods

12.50%

RNR[revenue neutral rate] on other goods

SPECIAL ADDITIONAL TAX (>20%)

Aviation turbine fuel (ATF)Petroleum productsFuelsE-merit goods

Goods

Under VAT

Particulars ACTUAL VAT SYSTEM

SELLING PRICE OF MANUFACTURER 'A' 100.00 100.00ADD: TAX @ 10% 10.00 10.00TOTAL SELLING PRICE OF 'A' 110.00 110.00COST TO MANUFACTURER 110.00 110.00

ADD:FURTHER PROCESSING CHARGES OF 'B' 40.00 40.00SELLING PRICE OF 'B' 150.00 150.00ADD: TAX @ 10% 15.00 4.00

TOTAL SELLING PRICE OF 'B' 165.00 154.00

Calculation of VAT

How does it Affect India.

In the above diagram.•Deadweight loss: the area of the triangle formed by the tax income box, the original supply curve, and the demand curve

•Governments tax income: the grey rectangle that says "tax”

•Total consumer surplus after the shift: the green area

•Total producer surplus after the shift: the yellow area

THE ULTIMATE EFFECT

Rs. 85,000,00,00,000

Eighty Five Thousand Crore Rupees.

Advantages of V.A.T

1. Easy to Administer and Transparent.

2. No Cascading Effect.

3. Minimum Exemptions.

Dis-Advantages of V.A.T

1. Detailed Records.

2. Causes Inflation.

3. Increase in Investment.

The Final Word!!

…Questions…

Presented by:

Gopi Gosai

Hiral Panchal

Amit Gurav

Sachin Ghulyani