Tuesday, February 17, 2009

Value Added Tax , its history , feature and calculation

Definition of Value added tax

" Value added tax ( generally known VAT ) is a sale tax and it is payable when a businessman sells goods to his customer . VAT is on the price which is added in purchase or raw material . Businessman has facility to deduct VAT ( Input ) out of VAT Output . Then he is liable to deposit net VAT to Govt. account . "

History of VAT
  1. VAT is applied first in mid 1960 in Brazil .
  2. VAT is started in European countries in 1970 .
  3. After this 130 countries accepted VAT .
  4. In India VAT on sale stage applied in 2005 . VAT at manufacturing stage is already in India for 18 years in the form of Mod VAT .
  5. Now , 145 countries has given acceptance for VAT .

Feature and Benefits

  • It is just conversion of sale tax , earlier business paid sale tax and now pays VAT .
  • It comes in existence due to defects of sale tax because sale tax law provide double tax burden on businessman .
  • Saving of businessman due to a set off is given for input Tax .
  • Overall tax burden will be rationalised .
  • Price will decrease with ending of cascading effect .
  • Simplicity
  • Higher revenue growth

So , Now you want to learn how to calculate VAT , then see below table and learn the simple system of Calculation of VAT

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