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Value
Added Tax (VAT)
VAT is the indirect tax on the consumption of the
goods, paid by its original producers upon the change in goods or
upon the transfer of the goods to its ultimate consumers. It is
based on the value of the goods, added by the transferor. It is
the tax in relation to the difference of the value added by the
transferor and not just a profit.
All over the world, VAT is payable on the goods and
services as they form a part of national GDP. It means every
seller of goods and service provider charges the tax after
availing the input tax credit. It is the form of collecting sales
tax under which tax is collected in each stage on the value added
of the goods. In practice, the dealer charges the tax on the full
price of the goods, sold to the consumer and at every end of the
tax period reduces the tax collected on sale and tax charged to
him by the dealers from whom he purchased the goods and deposits
such amount of tax in government treasury.
Method
of Collection
There are two methods for collection of VAT in India. In
the first method, tax is charged separately on the basis of the
tax which is paid on purchase, and the tax that is payable on the
sale (shown separately in the invoice). Therefore, the difference
between the tax paid on purchase and the tax payable on sale as
per the invoice is the VAT.
In the second method, tax is collected and charged on the
aggregate value of the tax payable on sale and purchase, by
applying the rate of tax applicable to the goods. Therefore, the
difference between the sale price and purchase price would be VAT.
It means VAT is the tax which consumers ultimately face, which is collected at each stage.
Sales
Tax
Sales tax is levied on the sale of a commodity, which is
produced or imported and sold for the first time. If the product
is sold subsequently without being processed further, it is exempt from sales tax.
Sales Tax is a levy on purchase and sale of goods in India and is
levied under the authority of both Central Legislation (Central
Sales Tax) and State Governments Legislations (Sales Tax). The
government levies Sales Tax principally on intra-state sale of
goods. States also levy tax on transactions which are "deemed
sales" like works contracts and leases. In addition to Sales
Tax, some states also levy additional tax, surcharge, turnover tax
and the like. Ordinarily, Sales tax is recovered
from the buyer as a part of consideration for sale of goods. Sales
tax is paid by every dealer on the sale of any goods made by him
in the course of inter-state trade or commerce, despite the fact
that no liability to tax is raised on the sale of goods under the tax laws of the appropriate state.
Sales
Tax ID number
A state Sales Tax ID number is essentially a business
version of your Social Security number, under which you collect
and pay tax for any service or product you sell, which in turn,
qualifies for taxation in
your state.
The rule of thumb for Sales Tax is that most services are
exempt and most products are taxable except for food and drugs,
though recent history reflects that states have been gradually
adding to the list of services that are taxable.
Since the execution of both Sales Tax & VAT is under
the state Sales/Commercial Tax Departments, a list of the same is
provided under:
* Andhra Pradesh
http://www.apcommercialtaxes.gov.in
* Delhi
http://www.delhi.gov.in/wps/wcm/connect/DoIT_TradeAndTaxes/tradeandtaxes/home/
* Karnataka
http://ctax.kar.nic.in
* Kerala
http://www.keralataxes.in/
* Maharashtra
http://www.mahavat.gov.in/Mahavat/index.jsp
* Meghalaya
http://megvat.gov.in/
* Tamil Nadu
http://www.tnvat.gov.in/English/brief.htm
* West Bengal
http://wbcomtax.nic.in/
Source: National Portal Content Management Team
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