VAT Tax - Theory of Levying - Assignment Example

India and the US, two of the democracies of the world, don't have a VAT system because the idea behind the VAT is system is a tax to end all taxes, but other countries that have VAT don't levy entry or luxury duty. If the prices of stock transfer goods increase then the impact of the VAT system would be, the "Denial of a tax credit in respect of inter-state stock transfers will prejudice investment in less developed states or states with relatively small 'internal' markets." Then every state government with the VAT system would have a draft law that wouldn't allow VAT already paid off elsewhere.

Tax experts now state that the price of consumer goods is increasing by 15-20%. The ministry of finance and state admin of tax posted a notice about the increase in electronically products in 1998, which caused the VAT to increase from 9% to 11%. The VAT rate for textiles is 15%, for the sale/import of most goods is 17%, and 13% for vegetable oil, natural gas, and chemical fertilizer. An organization that makes taxable goods have a 7% tax (inclusive of government taxes), this is the majority of businesses.

Some goods have a 0% VAT, in this case, the supplies do not collect the tax, but can put a recovery on its input tax. Some 0% VAT items are:Exported goodsServices provided in locally but used overseasServices of international transportation by air and sea. Ministry, Department, Local Government or public enterprises salesSale of goods and services to the United Nation Sale of goods and services from one warehouse or enterprise to another. The taxpayers' net tax is calculated and the beginning of each month that credits the amount of VAT paid on inventories, capital goods or raw materials that were for sale or in the process of consumption during the on the versus the total amount of VAT due on for the goods or services in the same months.

(Input Tax vs. Output Tax). What are VAT exemptionsThere are 10 categories that are excluded from the VAT tax, but keep in mind that a trader under any of these exemptions can't use input tax credits. Some exemptions are as follows: small entrepreneurs, unprocessed farm products (fertilizer, pesticides, etc), newspapers, magazines, textbooks, domestic and international transport, health and educational and medical services, libraries and museum services, religious services and charityTax InvoiceThe VAT-payers have to issue tax invoices to show the details of the value of goods sold.

An invoice is necessary because it is evidence of input tax for the taxpayers that buy goods. A tax invoice consists of:An obvious mention of 'TAX INVOICE' on the paperthe name, address, and tax identification number of the issuer; and the purchaser The serial numbers of the tax invoice and the tax invoice book the type, category, quantity, and value of the goods. This is similar to an income tax. These tax sales and deducts on capital goods. Only Argentina, Peru and the State of Michigan use this.