Value Added Tax (Vat)(2005-06)
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Transcript of 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!