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   Introduced From 1st April 2005 in India Benefit From  A Free Kaytek Business Advisory Service |
Consulting
Tax
VAT - Value Added Tax
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Introduced From 1st April 2005 in India Benefit From A Free Kaytek Business Advisory Service |
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VAT or Value Added Tax was introduced from 1st April 2005 in most of the states of India. VAT had evoked apprehensions and mis-information in the minds of many business people. To clear the same, this visual above demonstrates the VAT concept. VAT is a Tax to be paid at every stage of a Transaction involving the Purchase and Sale of Goods only (not Services). AdvertisementAs it's name suggests, it is paid at every stage wherever there is a Value-Addition at any stage of the Goods (as evidenced by the difference in the Purchase and Sale Price.) |
  The VAT charged on the purchase of the goods from the supplier is the Input Tax. The VAT chargeable on the sale of the goods to the customer is the Output Tax.
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The Goods Purchase Price would include an Input Tax paid at the time of purchases from the Supplier. Similarly, the Goods Sale would also include an Output Tax collected at the time of Sales To the Customer. VAT would be calculated on the difference between the Output Tax collected at the Time of Sales and the Input Tax paid at the Time of Purchases. In Summary, as is shown in the visual above,
VAT = Output Tax Amount - Input Tax Amount. VAT has significant implications on the Business Management, Accounting, Inventory and Tax Information Systems of an Organization. This cannot be construed to be legal or Taxation advice. Please consult your Sales Tax Attorney or Chartered Accountant for the same. |
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