VAT is a multi-point tax on value addition which is collected at different stages of sale with a provision for set-off for tax paid at the previous stage/tax paid on inputs. VAT eliminates cascading by providing for set off for taxes paid on inputs and only taxing value addition, tax on sales would be shown separately while issuing tax invoice or calculating tax liability. VAT Guidance Services, VAT Clients Guide, VAT Service Delhi, VAT Service India, VAT Client Services
VAT is tax on exchanges. It is levied on the added value that results from each exchange. It differs from a sales tax because a sales tax is levied on the total value of the exchange. For this reason, a VAT is neutral with respect to the number of passages that there are between the producer and the final consumer.
Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT on the materials and services that they buy to make further supplies or services directly or indirectly sold to end-users. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. VAT was invented because very high sales taxes and tariffs encourage cheating and smuggling. It has been criticized on the grounds that (like other consumption taxes) it is a regressive tax.
In India, VAT replaced sales tax on 1 April 2005. Of the 28 Indian states, eight did not introduce VAT. The states do have the power to set their own VAT rate.
The most essential prerequisite for success of VAT is elimination of CST. CST is levied on basis of origin and collected by the exporting state; the consumers of the importing state bear its incidence. CST creates tax barriers to integrate the Indian market and leads to cascading impact on cost of production. From June 1, 2008, the CST was reduced from 3% to 2% and is expected to be phased out by 31st March 2010.
No VAT on inter-State Sales, shall be levied and the Central Statutory Forms, i.e, Form C,D,F, H etc., shall also continue. However, in future, it is proposed that the tax rate for sale against C form shall be gradually reduced from present 2% to 0%.
Local or state level taxes like octroi, entry tax, lease tax, workers contract tax, entertainment tax and luxury tax are goes against the basic premise of VAT, which is to have uniformity in the tax structure.
VAT Rates
The state-level VAT rates are 4% and 12.5%. The special VAT rate on gold and silver goods is 1%. The traders with turnover below 5 lac are exempt. Traders with turnover between 5 lac to 50 lac pay at flat rate of 1%.
States implementing VAT for the first time have an option of 0% or 4% VAT on food grains, and of 4% or 12.5% VAT on tea.
VAT Return
VAT return is filed monthly. It is calculated by adjusting VAT input (VAT you have already paid while making the purchases) and VAT output (VAT you collected on the sales).
VAT in Delhi.
The VAT central office is Delhi is Department of Trade and Taxes, Vyapar Bhawan, I.P. Estate, New Delhi - 110002 (web site www.dvat.gov.in). The last date of filing VAT returns for May 2008 (Form DVAT-16) is 30th June 2008. The returns are received at the Front Office on the First Floor of the Vyapar Bhawan. The dealers filing monthly returns are also required to file returns electronically.
Rule 67 of Delhi VAT Rules, 2005 requires submission of Reconciallation Return in form DAVT 51. Last dates for submission of DVAT 51 are:
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