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Unit 14: Value Added Tax

be stored in a bonded store room. The plastic crates were again used for such transportation. Notes
Hence, the Tribunal opined that the plastic crates would also be eligible for CENVAT
credit as input.
In the light of aforesaid discussion, the large bench of the Tribunal held that CENVAT
credit was admissable on the plastic crates used as material handling equipment in the
factory premises as capital goods as also as input.
Source: http://220.227.161.86/20925frpubcd_bos1.pdf

14.5 Summary

 In this unit we have discussed about Value Added Tax and its basic features.
 VAT as proposed is intended to revolutionize our tax system, be responsive to economic
activity, and make a real contribution to nation building.

 It is our belief that VAT will bring higher levels of efficiency in the tax system, thereby
creating a new culture of voluntary compliance amongst tax payers.
 VAT is a multi-stage tax, levied only on value that is added at each stage in the cycle of
production of goods and services with the provision of a set-off for the tax paid at earlier
stages in the cycle/chain.

 The aim is to avoid ‘cascading’, which can have a snowballing effect on the prices.
 It is assumed that because of cross-checking in a multi-staged tax, tax evasion would be
checked; hence resulting in higher revenues to the government.

14.6 Keywords

Business: It includes any trade, commerce or manufacture, or any adventure or concern in the
nature of trade, commerce or manufacture, whether or not such trade commerce, manufacture,
adventure or concern is carried on with a motive to make gain or profit and, whether or not any
gain or profit accrues from such trade, commerce, manufacture, adventure or concern and any
transaction in connection with or incidental or ancillary to such trade, commerce, manufacture,
adventure or concern.
Manufacture: The conversion of goods into a new form, whereby an altogether different article
emerges.
Place of supply: The country where a supply of goods or services is said to be made for VAT
purposes.
Supply: Selling or otherwise providing goods or services, including hire purchase and lay
away.

Supply of goods: When exclusive ownership of goods passes from one person to another.
Tax period: The period of time covered by your VAT Return, i.e., one calendar year.
Taxable person: Any business entity that buys or sells goods or services and is required to be
registered for VAT - this can be an individual, partnership, company, club, association or charity.
Taxable supplies: All goods and services you sell or otherwise supply which are liable to VAT at
the standard, reduced or zero rate – whether or not you are registered for VAT.

Taxable turnover: The total value – excluding VAT – of the taxable supplies you make in the UK
(excludes capital items like buildings, equipment, vehicles or exempt supplies).

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