value added tax (vat)(2005-06)

8/6/2019 Value Added Tax (Vat)(2005-06)

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VALUE ADDED TAX (VAT)

(2005-06)* * *

Under the guidance of

Ms. Rosy Sudhanapresentation is prepared by:-

Kripi SinghXII-D, DAV Public School, Vasant Kunj


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VALUEADDED

TAX

*(VAT)


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IN ONE THE MOST LARGE

SCALE REFORMS OF THECOUNTRYS PUBLIC

FINANCES IN OVER PAST 50

YEARS, INDIA HAS FINALLY

AGREED THE LAUNCH OF ITS

MUCH DELAYEDVALUE ADDED TAX

FROM 1STAPRIL, 2005


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VAT

HAS COMEIN FORCE

w.e.f

APRIL 1, 2005

@

12.5%


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THE TAX IS DESIGNED TO MAKE ACOUNTING

MORE TRANSPARENT,CUT TRADE BARRIERS

AND BOOST TAXREVEUES


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Necessity of Value Added Tax

The General perception of the existing

single point sales tax system is that it is

highly complex with multiplicity of rates,plethora of explanation, many rates in

some group of item, extensive use of

statutory forms, high and unrealistic quota

of assessment, loss of revenue on valueadditions, tax rate war between States,

etc.


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The consensus was that a new

system is needed and Value

Added Tax has emerged as aprincipal instrument of taxing

domestic consumption world

wide during last four decades.


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The basic advantages of Value

Added Tax can be stated as its

neutrality, transparency,certainty and self policing

mechanism.


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It is now in operation in morethan 100 Countries.


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WHAT IS VAT

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

It is basically a tax on the value additionon the product.

The burden of tax is ultimately born by theconsumer of goods.

In many aspects it is equivalent to last

point sates tax. It can also be called as a multi point sales

tax levied as a proportion of ValuedAdded.


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IT IS A STATE VAT

The discussion regarding the VAT and theimplementation which is being planned is only confinedto the State.

There is no proposed Central VAT at present in the timeframe of 1.4.2003.

All the States are drafting their separate Value AddedTax Act and as per the present position.

every States will have a separate VAT Act with differentprovision not corresponding with each other.

It can be stated that the proposed VAT Act is the primarystage of VAT.

It is proposed that there would be Two tax rate slabs onwhich tax would be levied.


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The first one would be 4% and would

covered all essential items. The secondone is 10% and all luxury items would

be covered.

In addition special rate slabs are also

proposed which are 1% for bullion and

jewellery, 20% for non essential goods

and exemption to certain goods like

agricultural produce etc.


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Petroleum products are not

included in VAT rates.

Separate rate would be notified for

them.


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Set off. (Input Credit)

At present the set off would be availableon the goods locally purchased within the

State only.

No set off would be available to the goodspurchased in the course of inter state

trade and commerce.

It will be necessary to produce the taxinvoice to claim set off. The tax should

have been charged in the invoice.


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Exempted Goods

Some goods would be declared as

exempted by the State Government under

the proposed VAT Act. However the

present view as per guide lines issued by

the State Government are that no set off

would be allowed on the exempted goods.

It means that the tax suffered on the rawmaterial for manufacture of exempted

goods would not be refunded.


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Manufacturer

The manufacturer would be

required to purchase raw

material after paying full tax

on the rate applicable on

such material.


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Unlike the present system

wherein the manufacturer can

purchase the goods at a

concessional rate of tax againstdeclaration form no declaration

form will be required to be

issued by the Manufacturer.


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The input tax suffered by him would

be adjusted set off from the sale ofthe finished product.

The tax adjustment of input credit

of the goods purchased within the

State would be available on the

sales made within the State andalso on the inter state sales subject

to the tax payable.


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No adjustment would be

available of the input credit incase of branch transfer,

consignment sale.


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TRADER

The trader would be required to

collect tax on the sales made by him

and the tax liability would be setoff/adjusted from the purchase/

input tax credit of the goods locally

purchased in that State.


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ISSUE OF INVOICE

Under the proposed Value Added Tax

Act issue of invoice would be

mandatory. No set off/input creditwould be allowed unless the original

tax invoice is produced wherein tax is

clearly charged separately in theinvoice.


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Declaration Form

USE OF DECLARATION FORM OF PURCHASEOF GOODS ON CONCESSIONAL RATE OF TAXON NIL RATE OF TAX UNDER THE STATE ACTWOULD BE COMPLETELY FINISHED.

THERE WOULD BE NO REQUIREMENT OFDECLARATION FORM UNDER THE PROPOSEDVALUE ADDED TAX. HOWEVER THE ROADPERMITS LIKE ST 18 A AND ST 18 C

DECLARATION FORMSWOULD CONTINUE. DECLARATIONS FORMS OF CST ACT WOULD

ALSO CONTINUE.


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Accounting

The basic account books required

for the purpose of VAT Act are

Purchase and Sale Register.Both the registers would be the

basis on which the calculation of

payment of tax would be made.


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The normal practice of entering

the gross value of Purchase bill

would be changed. The

assessee would be required toenter the value of goods in the

goods A/c and the amount of

tax in the Tax A/c separately.


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STOCKS

Stock statement are required tobe furnished as prescribed for the

quarter ending and then monthly

from January to March.

Set off of tax paid stocks would

be given.


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Tax paid stocks as on march

ending would be the basis for claiming set of under the new

Value Added Tax (VAT) Act.

However, no set off would be

available for the tax paid stockpurchased prior to 1.4.2005.


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CAPITAL GOODS

Set off would also be available on thetax paid goods at the time of

purchase of capital goods under the

VAT Act. Basis of set off is yet to be declared.

However, it is presumed that set off

would be available within a span of 3years from the date of commercial

production.


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EXPORT

Export would be zero rated. Tax paid on

raw material used in manufacture of goods

for export would be refunded by the State

Government in cash/adjustment.

The exports would became more

competitive in the world market as there

would be no tax henceforth on rawmaterial used for manufacture of goods for

export.


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REGISTRATION

All importers, Manufactures,Exporters and Dealers having CSTregistration would be required to seekmandatory registration under the new

VAT Act. The existing registered dealers are

required to fill a FACT SHEET as

notified by the department within astipulated time which is at present15.2.2006 and then they would not berequired to seek fresh registration.


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TYPES OF REGISTRATION

There would be two types of registration. Thefirst is VAT dealers registration and the secondis composition scheme dealer registration.

The dealers opting under composition schemewould not be above to charge tax in the invoiceand he would pay lump sum fee as compositionamount.

It is apparently for retail traders and theexpected limit of turn over for option under composition scheme is maximum Rs. 15 lacs.


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Security Amount

Security amount for seeking registration is

likely to be increased many fold in VAT

Act. The security for registration under the

present act is Rs. 10,000.00

Apart from it, the assessing authority

would have a right to seek additional

security equal to 25% of the tax liability.


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Audit of Account

Every dealer having a turn over of

over 40.00 lacs would be required to

get his account audited by achartered accountant and submit the

audit report within the stipulated time.

Failure to do so would attract penaltyproceeding.


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Works Contract and Leasing

No clarification, provision or guide lines

had been issued by the department till

date on works contract and leasing

transaction.

The continuation of existing composition

scheme or by what method they would be

taxed in future has not been informed.


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SIMILARLY SMALL RETAIL

DEALERSWOULD BEREQUIRED TO MAINTAIN

MORE ACCOUNTS OR PAYCOMPOSITION MONEY

WHICH CAN NOT BE

COLLECTED FROM THECUSTOMERS.


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THE PRESENT PROVISION OF

CST AND VAT CAN NOT GO

TOGATHER. AFTER THEABOLITION OF CST THE DIRECT

MARKETING CONCEPT MAY

GAIN GROUND


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THE NECESSITY OF HAVING

WAREHOUSE, GODOWNSETC. IN ALL STATES MAY

DECREASE OR FINISHWHICHWOULD ADVERSELY

AFFECT THE TRADE AND

EMPLOYMENT OF THESTATES.


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opinions

apprehensionsand

reactions


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IRATE TRADERS


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CONFUSED COMPANIES

AM I GAINING OR LOSING?

ARE PRICES GOING UP OR DOWN

THE ORIGINAL EQUIPMENTMANUFACTURER CLAIMS VAT CREDIT

ON THE TAXES PAID TILL GOODS

REACH HIS PLANT.

HIS SELLING PRICE WILL INCLUDE

THE FULL VAT ON THE PRODUCT.


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QUESTIONS

WHAT WILL BE THE FATE OF INPUT TAX

CREDIT?

WHETHER THE SMALL DEALERS BE

BENIFITTED? IF THE INPUT IS USED PARTLY FOR MAKING

TAXABLE GOODS AND PARTLY FOR

EXEMPTED GOODS THEN?

HOW THE INPUT TAX CREDIT TO BE

CLAIMED?


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POLITICAL PARTIES

We will wait forthe answers to

our queries

Jagdish Shettigar

BJP Member


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POLITICAL PARTIES

ONLY IF THE TRADERS AGREE

Mulayam Singh Yadav

President

Samajvadi Party


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POLITICAL PARTIES

HANG ON TILL JULY

J. JAYALALITA

PRESIDENTAIADMK


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THE COUNTRY LIKE AMERICA

WHICH HAS SIMILAR FEDERAL ANDSTATE LAWS/CONSTITUTION HAS

NOT IMPLEMENTED VAT.

IT NEEDS STUDY AS TO WHY A

DEVELOP AND ADVANCEECONOMY LIKE AMERICA HAS NOT

ADOPTED VAT


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CONCLUDING

VAT WOULD CHANGE THE NATURE OF

TRADE IN THE COMING YEARS, BUT

THE MEDIUM LEVEL OF TRADE THAT

IS C&F AGENTS, DISTRIBUTORS,

STOCKIEST ETC. WOULD FACE

PROBLEMS AS THE COMPANIES

WOULD REDUCED THE TIER OFMARKETING.


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THANK YOU!

value added tax (vat)(2005-06)

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