Page 233 - DCOM308_DCOM502_INDIRECT_TAX_LAWS

Indirect Tax Laws Gopika Juneja, Lovely Professional University

Notes Unit 14: Value Added Tax

CONTENTS
Objectives
Introduction

14.1 Value Added Tax (VAT)
14.1.1 Difference between VAT and CST
14.1.2 Features of Value Added Tax

14.2 Main Features of VAT
14.3 Computation of VAT
14.4 VAT Rates
14.4.1 Importance of VAT
14.4.2 Advantages and Disadvantages of VAT

14.4.3 Items covered under VAT
14.4.4 Salient Features of VAT
14.4.5 Methods of Collecting and Charging the VAT

14.4.6 Levies of Tax under the VAT
14.4.7 Who is the Dealer?
14.5 Summary
14.6 Keywords
14.7 Review Questions

14.8 Further Readings

Objectives

After studying this unit, you will be able to:

 Explain why and how is VAT replacing sales tax
 Understand meaning, importance, advantages, disadvantages, methods of collection and
charging VAT

Introduction

Value Added Tax (VAT) is a general consumption tax assessed on the value added to goods and
services.
It is a general tax that applies, in principle, to all commercial activities involving the production
and distribution of goods and the provision of services. It is a consumption tax because it is
borne ultimately by the final consumer.
It is not a charge on companies. It is charged as a percentage of price, which means that the actual
tax burden is visible at each stage in the production and distribution chain.

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