VALUE ADDED TAX

BY,

PRESENTATION ON

NITIN DWIVEDI (35) MMM-C

VAT Terminology

VAT Value Added Tax This is the new system being implemented from April 1, 2005 in A.P and other states. Unlike, Sales Tax, VAT is calculated based on Input & Output variation.

VAT Terminology Input Tax

INPUT TAX Input Tax is the Tax shown in our purchase bills. As per the norms, every trader need to show Tax separately and it is considered as Input Tax. Apart from Trade Purchases, Tax on Capital Goods purchases like A.C., Computers etc.. is also considered for this Input Tax.

VAT Terminology Output Tax

OUTPUT TAX Output Tax is the Tax charged on all the Taxable sales of a Vat Dealer.

Output Tax is the Tax charged on all the Taxable sales of a Vat Dealer.

For Ex. Tax shown by us our Output Tax and it becomes Input Tax for our customer.

VAT Applicability

Below 5 Lakhs turnover No Tax & No. Regn required. 5 40 Lakhs TOT will apply & VAT is optional. Above 40 Lakhs VAT will apply.

VAT Rates

There are three main rates for Input and Output Vat tax. 0% for Agriculture products. 1% for Jewellery 4% for Pharma, Computers, Soaps etc. 12.5% for FMCG, Automobile

Input Tax Amount Calculation

Month Purchases Gross Value X Rate of Tax For ex.: Input Tax = 10,00,000 * 0.04 = 40,000/Purchases, includes Trade purchases and Capital Goods purchases as per the existing VAT Rate.

Output Tax Amount Calculation

Month Sales X Rate of Tax Output Tax = 20,00,000 * 0.04 = 80,000/On the invoice, we should show, Items Amount, VAT Value and Total Value In case of discounts, it should be given before VAT.

Tax Credit

If Input Tax is greater than Output Tax, then we should not pay Tax to Government. This amount will be carried forward to the next month. This is the Tax Credit Amount. Input Tax 1,00,000/Output Tax 50,000/Tax Credit = Input Tax Output Tax = 1,00,000 50,000 = 50,000/-

Opening Stock Tax Calculation

For Ex: 10 Lakhs with 10% SST - 1 Lakh as Opening Stock VAT Claim. Opening Tax Credit arrived can be re-deemed as follows: Opening Stock tax will be deducted between Aug 2005 Jan 2006 as 6 monthly installments. If still, credit is there after Jan 2006, it will be carried forward and it can be adjusted upto Jan 2008. If still additional amount is there, it will be paid by Govt in Mar 2008

Tax Amount Calculation

Output Tax (Input Tax + Tax Credit + Opening Stock Vat Adjustment Amount)
VAT Equation Sales Value Purchase Value = G.P X VAT Rate. Tax Paid Date If not paid by 20th of the month then 5000/- penalty

Opening Stock Value

6,00,000

Example
Month Purchases Sales

Tax Rate

10%

Claimed

60000

Input Tax

Output Tax

Tax Payable

Opening Stock 0 0 0 0 10000 10000 10000 10000 10000 10000 0 0

Tax Credit

April May June July August September October November December January February March

50000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000 100000

60000 200000 80000 80000 80000 80000 120000 80000 80000 130000 80000 100000

2000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000

2400 8000 3200 3200 3200 3200 4800 3200 3200 5200 3200 4000

400 0 0 0 0 0 0 0 0 0 0 0

0 -4000 -4800 -5600 -16400 -27200 -36400 -47200 -58000 -66800 -67600 -67600

Tips for VAT Accounting

In March 2005, it is suggested to reduce the stocks and do not purchase, unless, it is urgent. This way, we can reduce opening stocks for New Fin. Year. In April, May, June, July, We suggest to maintain balance of Purchases and Sales, which helps to plan Tax in a better way. From August onwards, you can reduce purchases, as Opening Stock Credit will be used from these months.

TYHAK YOU..