SAP CIN VAT Presentation

7/30/2019 SAP CIN VAT Presentation

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VAT


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I/P tax

Tax paid on Purchases by Registered

dealer

O/P tax

Tax paid on sales by Registereddealer


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Consider the chain : ManufacturerWholesalerRetailer

Manufacturer Wholesaler Retailer

Purchases 100 125 150

Sales 125 150 300

Sales tax rate/VAT RATE = 10%

Under ST regime , Sales tax payable would be : 10% on 125 = Rs 12.50

Under VAT regime , VAT = (12.05 - 10.00) + (15.00 - 12.50) + (30.00 - 15.00)

= Rs 20.00

Thus under VAT , the longer the Distribution chain , greater

is the tax amount paid to the government.

Industries to trim down the Distribution channels in order to

control prices.


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Under VAT regime , CST will not be eliminated

immediately.

It will be phased out in phases.

Ex : 2% CST in the first year of VAT introduction

1% CST in the following year

and then no CST.

Thus what would be available would be hybrid VAT

and not pure VAT initially.


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Under VAT regime , tax base will get

widened.This is because, everyone will try to get

credit on his purchases. And to claim credit ,

you need to have a tax/VAT invoice.Everyone would demand invoice and thus

tax base would get widened.


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VAT rates ?

0% - Commodities like Rice , Milk , .

1% - Gold , Silver

4% - Agricultural Inputs

Around 10-12% - on all other goods.

This rate is called RNR (Revenue Neutral Rate).

This is such a rate , that revenue of Stategovernment would not diminish , despite ranting

tax credit on I/P Purchases.


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Sales under VAT can broadly be classified under 3 categories :

Taxable Sales Exempt Sales Zero rated sales(Exports)

Tax payable Tax ratepayable = 0%

Tax ratepayable = 0%

Can claim I/Ptax credit onPurchases

Cannot claimI/P tax credit onPurchases

Can claim I/Ptax credit onPurchases


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Invoices under VAT regime :

Tax invoice will contain identity of Seller and

Buyer

i.e. Name , Address , Registration number

Retail invoice will contain identity of Seller alone

On Retail invoice you cannot claim I/P tax credit.

Generally issued for small amounts.


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How to pay and claim VAT ?

To be paid at the time of monthly returnssubmission.

Will get credit within the same month for VAT

paid on Purchases.

Proof required to claim I/P tax credit : Musthave a copy of tax invoice


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Records to be maintained for the purpose of VAT accounting

Purchase records Details of :

-- Purchases from Suppliers who are not registered for VAT

-- Purchases exempt from VAT

-- Imports and Purchases from Other States

-- Purchases with VAT rate of 4%

-- Purchases with 1 % VAT rate

-- Purchases with standard VAT rate.


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Sales Records Details of :

-- Exempt Sales-- Zero rated sales

-- Inter state sales

-- Taxable sales at 4%

-- Taxable sales at 1%

-- Taxable sales at Standard rate.


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TIN Tax Identification Number for all dealers will

be given.

It has been suggested that TIN should be a 10 digit codeconsisting of :

2 digits for State,

3 digits for circle,

4 digits for individual dealer and

1 digit for checking purposes.

In another opinion suggested , it would be a 12 digit code.

First 10 digits will be PAN of Income Tax and

next two digits will be serial number of the dealerReason for this suggestion is that customs and central excise

authorities are already using PAN based registration number

for control purposes.

Documents

SAP CIN VAT Presentation