-
8/19/2019 PPT VAT
1/36
Value Added
Tax(VAT)By - SANJAY KUMAR
Asst. Prof. of La
T!e "BNUJS# Kol$ata
-
8/19/2019 PPT VAT
2/36
T!e "BNUJS# Kol$ata
Sales Tax Syste%
Sales tax
s&'le o&'t%ult&o&'t
*rst o&'t+MST last o&'t+RST
-
8/19/2019 PPT VAT
3/36
,o'st&tut&o'al Pro&s&o's
• Art. /0- 1'o tax s!all 2e le&ed or3olle3ted ex3et 2y
aut!or&ty of la4
• Art. 5/(6) read &t! 7'try 05# L&st
88(State L&st)# S3!edule V88 of,o'st&tut&o' of
8'd&a e%oers t!estates to ley tax o' sale or ur3!ase
of oods• 7ery states !ad Sales tax le&slat&o' to
ley# 3olle3t a'd ad%&'&ster sales tax
-
8/19/2019 PPT VAT
4/36
Sal&e't 9eatures of Sales Tax Syste%
• To taxes :
Sales tax ; al&es to sales &t!&' t!eState
,e'tral sales tax-al&es to &'ter-state sales
• e3t&e sales tax rate 3a' 'ot
ex3eed 5? a'd 'o %ult&o&'t
-
8/19/2019 PPT VAT
5/36
,o'td@@
• Tax 8'3e't&e S3!e%es – Tax !ol&days
&.e. 'o 3olle3t&o' of tax
– Tax deferral &.e. 3olle3t&o' of taxes
2y
t!e dealers 2ut ay%e't to ot. &sdeferred for se3&*ed
er&od. 8t &s l&$e&'terest free loa'
– Tax re%&ss&o' &.e. 3olle3t&o' of
taxes
!&3! &ll 2e $et 2y dealer !&%self a'd'ot to 2e
a&d to t!e ot.. 8t &s a&d tot!e dealer
– 7'd use exe%t&o' e.. u2l&3
!os&tals#%&l&tary 3a'tee's# et3.
-
8/19/2019 PPT VAT
6/36
• Mult&le tax rates
• Add&t&o'al tax &' t!e for% ofsur3!are or tur'oer
tax# 3ess
• 7'try tax a'd o3tro&
-
8/19/2019 PPT VAT
7/36
-
8/19/2019 PPT VAT
8/36
,o'td@.
• ,as3ad&' e>e3t# &.e.# tax o' tax. 8' salestax
syste%# 2efore a 3o%%od&ty &srodu3ed# &'uts are *rst
taxed a'd t!e'
after t!e 3o%%od&ty &s rodu3ed &t!&'ut tax load#
outut &s taxed aa&'
• Vert&3al &'terat&o' &.e. !ere%a'ufa3turer of a
rodu3t de3&des torodu3e t!e &'ut !&%self
• 8'terfere'3e &t! rodu3t&o' de3&s&o's
-
8/19/2019 PPT VAT
9/36
Ba3$rou'd•
==- LPC ol&3y• Meet&'s+ 3o'fere'3es of ,!&ef
M&'&sters &'
=0D =
• T!e 7%oered ,o%%&ttee of State 9&'a'3e
M&'&sters# 3o'st&tuted 2y t!e M&'&stry
of9&'a'3e# CE8 &' July FFF# o' t!e 2as&s
ofresolut&o' adoted &' t!e 3o'fere'3e of t!e3!&ef
M&'&sters o' Noe%2er =/# =
• E' Ja'uary =G# FF0# t!e ,o%%&ttee releasedA "!&te Paer
o' State-Leel alue Added Tax
-
8/19/2019 PPT VAT
10/36
-
8/19/2019 PPT VAT
11/36
VAT-Mea'&'#
-
8/19/2019 PPT VAT
12/36
,o'td@.
8llustrat&o': Let us assu%e a 3!a&' oftra'sa3t&o's
&'ol&'# A- Sul&er of&'uts# B- Ma'ufa3ture of
taxa2leoods# ,- "!olesaler#
-
8/19/2019 PPT VAT
13/36
Met!ods to ,o%ute VAT
• Add&t&o' Met!od
• Su2tra3t&o' %et!od
•
8'ut tax 3red&t (8T,) %et!od
8T, %et!od &s folloed for
3o%utat&o' of VAT 2e3ause of &ts%er&ts oer ot!er
%et!ods
-
8/19/2019 PPT VAT
14/36
Add&t&o' Met!od
• Value added to a 3o%%od&ty &s deter%&'ed2y
add&' t!e alue of all ele%e'ts !&3!3o'tr&2ute &'
&'3reas&' t!e alue of t!e
3o%%od&ty. T!us# alue added all trad&' D
%a'ufa3tur&'
exs. Pro*t
Demerits:
-
,o%utat&o' &s oss&2le o'ly after t!e e'd of t!eyear
!e' *'al A+,s are ready
- Tax l&a2&l&ty# ee' &f t!e 3o%%od&ty
&s sold at aloss
-
8/19/2019 PPT VAT
15/36
Su2tra3t&o' Met!od
• Value added &s 3o%uted 2y su2tra3t&' fro% t!ealue of
t!e outut t!e alue of &'ut (ur3!ases)
T!us# alue add&t&o' sale r&3e ; ur3!ase
r&3e
Demerits:- t!e seller %ust $'o a33urately t!e ur3!aser&3e of
t!e 3o%%od&ty 2e&' sold
- !e' t!e ur3!ase r&3e a'd sale r&3e &ll 2e
$'o' to t!e 2uyer# !e &ll alays &'s&st t!eseller to
redu3e t!e r&3e a'd %a$e a less ro*t
-
8/19/2019 PPT VAT
16/36
8T, Met!od
• Also $'o' as 8'o&3e Met!od
• All states !ae adoted t!&s %et!od
• 8' t!&s %et!od# tax 3!ared &s s!o'
searately &' t!e &'o&3e (2&ll) a'd t!e tax
&s'ot &'3luded &' t!e a%ou't of tur'oer oft!e dealer.
T!e dealer &s reu&red to ay t!ed&>ere'3e of !at tax
!e !as 3!ared a'd
!at tax !e !as a&d at t!e earl&er stae.• T!us# VAT
tax aya2le o' sale ; tax a&d
o' ur3!ase
-
8/19/2019 PPT VAT
17/36
9eatures of VAT
• 8'ut tax 3red&t
- &t &s a 2a3$2o'e of VAT. 8t &s aa&la2le to
al%ost allt!e dealers u'less ot!er&se ro&ded
• Tax o' 3a&tal oods – As de3&ded 2y t!e
e%oered 3o%%&ttee# t!ere &s
'eat&e l&st of 3a&tal oods 'ot el&&2le
oods
– Tax 3red&t &s aa&la2le. Hoeer tax
3red&t %ay 2eadIusted oer a %ax&%u% of 6/ eual %o't!ly
&'stall%e'ts – T!e States %ay# at t!e&r
ot&o'# redu3e t!e 'o. of
&'stall%e'ts
-
8/19/2019 PPT VAT
18/36
,o'td@.
• Pur3!ases 'ot el&&2le for 8T,
– 9ro% u're&stered dealer
– 9ro% re&stered dealer ot&' for
3o%os&t&o' s3!e%e
– Not&*ed 2y t!e state ot.
– "!ere t!e roer &'o&3e &s 'ot
aa&la2le – "!&3! are 2e&' ut&l&sed
&' t!e
%a'ufa3ture of exe%ted oods
– 8'ter-state ur3!ases
-
8/19/2019 PPT VAT
19/36
,o'td@..
• Re&strat&o' –
-
8/19/2019 PPT VAT
20/36
-
8/19/2019 PPT VAT
21/36
,o'td@..
• Retur' – Mo't!ly or uarterly as %ay 2e se3&*ed
– A33o%a'&ed &t! ay%e't 3!alla's
– S3rut&'&ed exed&t&ously &t!&'
res3r&2ed t&%el&%&t fro% t!e date of *l&' of
t!e retur'
• Assess%e't – No 3o%ulsory assess%e't at t!e e'd of ea3!
year
– Self assess%e't 2y t!e dealer &' ter%s
ofsu2%&ss&o' of retur'
-
8/19/2019 PPT VAT
22/36
,o'td@..• Aud&t
–
S&'3e t!ere &s 'o 3o%ulsory+ reularassess%e't# aud&t
&s reu&red
–
-
8/19/2019 PPT VAT
23/36
• ,oerae of oods# Rates a'd,lass&*3at&o' of oods –
8' e'eral# all t!e oods &'3lud&' de3lared
oods are 3oered – 9e oods $et outs&de VAT l&$e
l&uor# lottery
t&3$ets# etrol# d&esel# a&at&o' tur2&'e
fuel(AT9) a'd ot!er %otor s&r&t as t!e&r r&3es
are
'ot fully %ar$et deter%&'ed. Su3! oods &ll3o't&'ue
to 2e taxed u'der t!e Sales Tax A3tor ot!er State A3t or ee' 2y
%a$&' se3&alro&s&o's &' t!e VAT A3t
&tself
-
8/19/2019 PPT VAT
24/36
• To 2as&3 rates of 5? a'd =.0?(Ree'ue Neutral
rate)a'd o'e se3&al rate of =?
• Rate stru3ture &s as follos-
3ateory A ; exe%ted oods (e'erally 'atural a'd
u'ro3essed rodu3ts# &te%s !&3! !ae
so3&al&%l&3at&o's# et3.)
3ateory B ; ero rated oods+sales# &.e.# sale s!all 2eexe%ted
a'd &'ut tax s!all 2e refu'ded ( exort of
oods)
3ateory , ; oods taxed O5? ( oods 3o%%o' for allt!e States#
&te%s of 2as&3 'e3ess&t&es l&$e
%ed&3&'es Ddrus# all ar&3ultural D &'dustr&al
&'uts# 3a&tal oods
a'd de3lared oods
-
8/19/2019 PPT VAT
25/36
,o'td@.
3ateory
-
8/19/2019 PPT VAT
26/36
,o'td@.
• S%all dealers a'd 3o%os&t&o' s3!e%e –
-
8/19/2019 PPT VAT
27/36
,o'td@..
Ada'taes:
- s&%le 3al3ulat&o'
- s%all tax &ll 2e aya2le- s&%le re3ords to 2e
%a&'ta&'ed
-
8/19/2019 PPT VAT
28/36
Levy of VAT in Case of WorksContract
• 7'try 05# L&st 88# S3!edule V88 read&t! Art. 5/ e%oers
t!e statesto ley sales tax
• 9or sales tax# To 3o'd&t&o's - Salea'd oods
• Coods %ea's %oa2le a'd
%ar$eta2le
• Sale State of Madras v. GannonDunkerley & Co. (Madras)
Ltd.,( =0Q)
ST, 06 S,
-
8/19/2019 PPT VAT
29/36
,o't&'ued@@.
• 8t led to tax ao&da'3e a'd 3aus&'!ue ree'ue loss to
t!e States
• /= Reort# =G5# La ,o%%&ss&o' of
8'd&a• 5/ ,o'st&tut&o'al A%e'd%e't# =Q-
8'sert&o' of Art. 6//(A)- Taxes o'
sale or ur3!ase of oods &'3ludes#inter alia, taxes o' t!e
tra'sfer ofroerty &' oods (!et!er as oodsor &' so%e ot!er
for%) &'oled &'exe3ut&o' of or$s 3o'tra3t
-
8/19/2019 PPT VAT
30/36
,o't&'ued@@
• T!us 3o'3et of dee%ed sale as&'trodu3ed
• ,o'tra3t for sale a'd 3o'tra3t foror$-
-
8/19/2019 PPT VAT
31/36
Nature of Real 7state Tra'sa3t&o'Situation-I
• A-La'd E'er B-
-
8/19/2019 PPT VAT
32/36
Situation-II
• A-La'd E'er aree%e't to deelo B-
-
8/19/2019 PPT VAT
33/36
"or$s 3o'tra3t for ley ofVAT
• 1"or$s 3o'tra3t &'3ludes a'yaree%e't for 3arry&' out
for 3as!or for deferred ay%e't or for
alua2le 3o's&derat&o'# t!e
2u&ld&'3o'stru3t&o'# %a'ufa3ture#ro3ess&'#
fa2r&3at&o'# ere3t&o'#
&'stallat&o'# *tt&' out# &%roe%e't#rea&r or
3o%%&ss&o'&' of a'y%oa2le or &%%oa2le roerty4
-
8/19/2019 PPT VAT
34/36
,o't&'ued@.
• #. $ahe%a Develop"ent Corporation v.State of #arnataka, A8R
FF0S, 60F
Held:
- T!e de*'&t&o' &s ery &de- 8t &s 'ot
restr&3ted to or$s 3o'tra3t as3o%%o'ly u'derstood &.e. a
3o'tra3t to doso%e or$ for a'd o' 2e!alf of so%eo'e else
- 8t &'3ludes a'y aree%e't for 3arry&' outfor
3o's&derat&o'# 2u&ld&' a'd 3o'stru3t&o'of a'y
%oa2le or &%%oa2le roerty
-
8/19/2019 PPT VAT
35/36
,o't&'ued@..
– See&' re%ar$- 1 &f t!e aree%e't &se'tered
&'to after t!e at or u'&t &s already3o'stru3ted# t!ere
ould 2e 'o or$s3o'tra3t. But so lo' as t!e aree%e't &se'tered
&'to 2efore t!e 3o'stru3t&o' &s3o%lete# &t ould 2e
or$s 3o'tra3t4
8' ssote!h $ealty 3ase# All. H&! ,ourta'd &' Maus
!onstru!tion 3ase# Cua!at&H&! ,ourt# too$ t!e 3o'trary
&e
-
8/19/2019 PPT VAT
36/36
,o't&'ued@
• 8' Larsen & 'ouro Ltd and others . State of #arnataka
and others#(FFQ) =G VST 5/FS,
T!e S,-ra&sed dou2ts o' K. Ra!eIasrat&o a'd
o2sered t!at &f K.Ra!eIasrat&o &s a33eted# t!ere
&ll 2e 'o
d&>ere'3e 2etee' 3o'tra3t for salea'd or$s 3o'tra3t-
%atter referredto larer 2e'3! of S,
