Taxation is the process through which the government levies charges on services, goods and transitions. This is a very important power that a government possesses. The tax is applicable at certain stages of the goods and services purchase .VAT is one of such tax.
VAT can be defined as the tax imposed on the sales of services and goods commodities are sold to the consumers.
The VAT is regarded as a very vital integral section of a country’s GDP. While the VAT is imposed on the sale of services and goods and paid to the administration by the producers. The cost of the tax is however catered for by the customers of the commodities. Thus it’s regarded as an indirect form of taxation paid by costumers to the administration through the producers or sellers of the commodities.
VAT is implemented as a multiple stage form of taxation. The charges occur at every stage of taxation of the services and goods sale or purchase. Any individual who is earning an annual turnover of Rs.5 lacks and more should register as a VAT payer. This tax is imposed on goods and services that are either local on imported.SPONSORED LINKS
Features of VAT in India
- Similar services and goods are to be taxed the same for example a television regardless of the brand type is to be taxed the same.
- VAT is to be levied at each production stage and therefore making the taxation process more transparent and simple
- VAT greatly reduces the chances of tax evasion and encourages tax compliance.
- Encourages lots of transparency of goods and services sales to the most tiniest level
It is in fact calculated as the set difference between the output tax and the input tax.
VAT = INPUT TAX – OUTPUT TAX.
Output tax refers to the tax that a seller receives for his or her services and goods sale and input tax refers to the tax the seller is expected to pay for the raw materials which ate required in the production of his services and goods.SPONSORED LINKS
The benefits of VAT
- India was one of the late countries to introduce the implementation of VAT. The taxation process was exploited by business people who would find loopholes present in the taxation process therefore easily avoiding taxes. VAT was introduced into the country so as to minimize the level of tax evasion, which was taking place. It also renders the taxation process transparent and presents uniformity in payment process of tax.
- There are no exemptions under this system since the levying has been imposed at each production stage so as to ensure better compliance and less exploitation of the present loopholes.
- When imposed properly it will form a very important instrument of tax consolidation in the country and therefore be of great help in solving deficit issues
- Since VAT has been accepted globally, India is able to properly integrate into trade with other countries.
Therefore, VAT should be embraced in a country because it plays a vital role in the economy.