Value Added Tax (VAT) in India is an indirect tax on goods and services. It is payable at every stage of the supply chain i.e., from the manufacturer till the goods reach the retailer. The producer who is liable to pay VAT, does so to the state government. VAT calculation is on the basis of output tax and input tax. The VAT Rates may differ from a state to another. This tax applies only on goods transacted within a specific state. Thus, the seller and purchaser have to be in the same state.
In this post, we will discuss VAT features, registration and its steps, Value Added Tax Rates in India, VAT collection, and frequently asked questions.
Here are the features:
It is compulsory for all manufacturers participating in the production of goods and services to do VAT registration. The procedure for registration consists of listing the company as a corporation eligible to file VAT return with the government. According to the VAT Registration Act, all the business organizations have to mandatorily register for Value Added Tax payments. It is possible to register online, which makes the procedure quick and effective.
Here are the steps for online VAT registration:
The VAT rates in India differ from a state to another. The state government collects the tax payments. Here are the types of VAT rate that exist in the country:
The method for VAT collection is categorized in two major categories:
Here are the Value Added Tax FAQs:
For trade, VAT enhances the business with uniform rates. It offers 100% self-assessment, thus, improving the turnaround time and saving a visit to the tax department officer. Also, for consumers VAT eliminates the tax-on-tax effect. It reduces the price of goods for the end consumer. For the government, dealers can self-assess and pay VAT quickly. This reduces the procedures the revenue department has to undertake to review tax payments. They get to cut down on the administrative procedures, and focus more on the collection.
Here, the goods cannot be put under fixed VAT rate categories. Examples include cigarettes, liquor, etc that may attract a rate between 12.5% to 15% or higher.
Here are the key distinguishing points:
VAT calculation goes by Output Tax – Input Tax. The Output Tax applies to the customer. This is applicable on taxable sales that the dealer makes. The seller or dealer can be a wholesaler, manufacturer, or retailer that is registered under VAT. So, if the eligible person makes a sale over the prescribed limit, he/she has to do VAT registration. After registration, VAT is chargeable on the taxable sales for a specific duration, usually monthly.
Input VAT is on eligible purchases that a dealer makes. The registered dealer under VAT has to pay in cash for a particular month to the state government. The registered dealers can claim the VAT credit charged on the maximum of their business purchases.