Taxation is defined as the procedure of levying taxes on goods and services during the transaction process by the government. Taxation is a strong authorisation power held by the government of India because the government has the right to levy fines on tax defaulters and impose income taxes on the citizens. There are many kinds of taxes which are applied during the various stages of selling goods and services and VAT or Value Added Tax is one type of taxation as well.
The taxation procedure in VAT is lucid and it also distributes equal tax burden to the different groups involved in each step:
Before the launch of Value Added Tax (VAT) in India, the taxation system was exploited by businessmen and enterprises who found weaknesses in the taxation system and began evading taxes. This is when VAT came into India to reduce tax evasion and introduce transparency for equally distributing the tax burden amongst everyone.
Since Value Added Tax undergoes multiple stages of taxation during the production of goods and services, it falls under the surveillance of the respective state government where the business is established. This is one of the main reasons why in India taxation system differs slightly from one state to another.
The key features that indicate the benefits of VAT in India are as follows:
There are two variants of VAT Calculations:
To calculate the amount of VAT to be added to the price of a commodity firstly, calculate the multiplier.
The current rate of VAT is 14%, therefore:
14 divided by 100% = 0.14
0.14 + 1 = 1.14
The multiplier is 1.14
Now, the multiplier can be used to calculate VAT that should be added to the price of the commodity.
If the product is being sold for Rupees 100, VAT can be determined by taking the product price and multiplying it by 1.14.
Rupees 100 x 1.14 = Rupees 14 is the VAT added to the price of the commodity.
Hence, the total price of the product, inclusive of VAT charges will be Rupees 114.
To calculate the amount of the commodity (VAT applied goods) before VAT has been added to it, firstly determine the divisor.
The divisor is determined using the current Indian VAT rate of 14%.
14 divided by 100% = 0.14
0.14 + 1 = 1.14
The divisor is 1.14
If the VAT-inclusive price of the commodity was Rupees 114, then this amount is taken and divided by 1.14.
Rupees 114/1.14 = Rupees 100
The actual price of the commodity is hence, Rupees 100.
Deciphering the Taxes, Charges and VAT on Restaurant Bills in India Get Details
As per the VAT law, one cannot sell any goods in the absence of a sales document. This referred document could be a simple cash memo, cash sale, bill for the cash transactions etc. As per the VAT law, all the tax invoices must be serially numbered and issued in a serial number format.
The invoices must produce the following confirmation:
But, in the case of a retailer who primarily supplies taxable goods to unregistered parties, the retailer will be required to provide a simplified tax invoice.
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It’s the tax season and everyone is busy filing their taxes. Things have become a lot easy with the introduction of e-filing. Now you can file taxes from the comforts of your home. Despite the advent of technology we see a large number of income tax rejections. Wrong selection of forms and insufficient document are some of the major reasons
05th July 2017
All India ITR Blog
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