Page 236 - DCOM308_DCOM502_INDIRECT_TAX_LAWS

Unit 14: Value Added Tax

(xi) Supplementary Duty (SD) is imposed at local and import stage under the VAT Act, 1991. Notes
Existing statutory SD rates are as follows:
(a) On goods: 20%, 35%, 65%, 100%, 250% & 350%
(b) On services: 10%, 15% & 35%.
Some more features of VAT are:
1. Uniform schedule rates of VAT for all states. This would make the tax system simple and
uniform and prevent unhealthy tax competition among states.
2. The provisions of input tax credit would help in prevent cascading effect tax.
3. The provisions of self assessment by dealers would reduce harassment small traders with
turn over upto 5 lakh would be exempt from the provisions of VAT.
4. The zero–rating of exports would increase the competitiveness of Indian exports.

Self Assessment

Fill in the blanks:
1. Value Added Tax (VAT) is a multi point ........................... with set off for tax paid on purchases.

2. The aim is to avoid ........................... which can have a snowballing effect on the prices.
3. Under the VAT system, the retailers are not subject to tax except for the ........................... tax.
4. Value Added Tax is a multistage sales tax with ........................... for taxes paid on business
purchases.
5. The ........................... regime does away with such concessions as it would provide the full
credit on the tax that has been paid earlier.

14.3 Computation of VAT

VAT can be computed by adopting three alternative methods. They are:
1. Addition method: Calculation of value added can be done by summation of all the elements
of value added (i.e. profits, rent, and wages).

2. Subtraction method: This method estimates value added by taking the difference between
the value of outputs and inputs.
3. Tax-credit method: Under this method the tax on inputs is deducted from the tax on sales
to arrive at the VAT payable by the dealer. In practice, most countries use this method.

Describe the ways for computation of VAT.
Task
The VAT Computation reports provide the Assessable Value and the Tax Amount of the purchase
and sales transactions entered using different VAT/ Tax classifications. The adjustment entries
recorded using the VAT Adjustments are also captured in the VAT Computation.
To view the VAT Computation report,

Go to Gateway of Tally > Display > Statutory Reports > VAT > VAT Computation

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