VAT Terminology

Basics Of Value Added Tax The Value Added Tax (VAT) is a tax on the value added by any business intermediary through his own activity on the goods and services (Inputs) it buys from the other business intermediaries. In the modern production distribution chain, a product goes through different stages of ...

Income Type : Value Added Tax (VAT) India In this kind of VAT, taxable income is calculated by deducting purchase of raw materials as well as depreciation from Sales. Tax is calculated on taxable income.

Product Type : Value Added Tax (VAT) India In this kind of VAT, taxable income is calculated by deducting purchase of raw materials only and no deduction is allowed for capital expenditure. This system discourages the capital intensive projects and encourages the tax avoidance by classifying capital expenditure as ...

Consumption Type : Value Added Tax (VAT) India In this kind of VAT, taxable income is calculated by deducting the purchases of raw materials and capital items from the Sales. Consumption Type VAT is popular and is adopted by most of the countries in the world because of the ...

Origin Principle : Value Added Tax (VAT) India VAT is said to use the origin principle when the tax is levied on "domestically added value" to all goods including goods which are subsequently exported. It taxes all the values which originate in the country. It does not tax value that has ...

Destination Principle : Value Added Tax (VAT) India VAT is said to use Destination principle when it taxes all additions in values either domestically or abroad, to all goods that have as their destination the consumers of the country. The exports are exempt and imports are taxable under this ...

Methods of implementation of VAT : Value Added Tax (VAT) India Following are two methods of implementation of VAT. 7.5.7 Subtraction Method The value added by a firm is found by subtracting the cost of purchases from its sales. This value added is then subject to VAT rate ...

Tax Credit Method : Value Added Tax (VAT) India Gross Tax payable by a firm is calculated by applying VAT rates to the sales of the firm. This is sum total of tax figures appearing in sales invoices issued by the firm during the tax period. The net tax ...

Exemption or Zero Rating : Value Added Tax (VAT) India Exemption in VAT means exemption from tax on the value added tax of a commodity at a particular stage of production distribution cycle. It does not allow input tax credit of all the earlier stages of cycle. Zero rating ...

Single or multiple rates : Value Added Tax (VAT) India Some countries have gone in for adoption of single rate of value added tax, as it is administratively easy to handle. Most of the countries including India have gone in for multiple rates as VAT taxes. Multiple rates give more ...