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Value Added Tax in Maharashtra - project report mba

Value Added Tax in Maharashtra - project report mba

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Published by kamdica
Value Added Tax in Maharashtra - project report
Value Added Tax in Maharashtra - project report

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Published by: kamdica on Oct 14, 2009
Copyright:Attribution Non-commercial


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CONTENTSr. No.Topics CoveredPage No.1Section I Introduction to Value Added Tax.1 122Section II Value Added Tax in Maharashtra.13A. Introduction.B. Registration under Value Added Tax.C. Explaining Value Added Tax.D. Calculating Tax Liability.E. Filing of Return and Paying Tax.F. Records and Accounts.G. Business Audit.H. Appeals.I. Tax Payer Service.J. Recovery, Offences and Penalties.14 – 1617 – 2122 – 2728 – 3637 – 4445 – 4849 – 5152 – 5657 – 6162 – 663Section III Appendix. 67 694Section IV Conclusion.705Section V Bibliography.71
Value Added Tax in MaharashtraWHAT IS VALUE ADDED TAX?
Value Added Tax is a broad-based commodity tax that is levied at multiple stages of production. The concept is akin to excise duty paid by the manufacturer who, in turn,claims a credit on input taxes paid. Excise duty is on manufacture, while VAT is on saleand both work in the same manner, according to the white paper on VAT released byfinance minister Chidambaram. The document was drawn up after all states, barringUP, were prepared to implement VAT from April. It is usually intended to be a tax onconsumption, hence the provision of a mechanism enabling producers to offset the taxthey have paid on their inputs against that charged on their sales of goods and services.Under VAT revenue is collected throughout the production process without distortingany production decisions.
While theoretically the amount of revenue collected through VAT is equivalent to salestax collections at a similar rate, in practice VAT is likely to generate more revenue for government than sales tax since it is administered on various stages on the production – distribution chain. With sales tax, if final sales are not covered by the tax system e.g.due to difficulty of covering all the retailers, particular commodities may not yield anytax. However, with VAT some revenue would have been collected through taxation of earlier transactions, even if final retailers evade the tax net.There is also in-built pressure for compliance and auditing under VAT since it will be inthe interest of all who pay taxes to ensure that their eligibility for tax credits can bedemonstrated. VAT is also a fairer tax than sales tax as it minimizes or eliminates theproblem of tax cascading, which often occurs with sales tax. These are facilitated bythe fact that VAT operates through a credit system so that tax is only applied on valueadded at each stage in the production – distribution chain. At each intermediate stagecredit will be given for taxes paid on purchases to set against taxes due on sales. Only
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Value Added Tax in Maharashtra
at consumption stage where there are no further transactions will there be no taxcredits. Lack of input credit facility in sales tax often results in tax on inputs becoming acost to businesses which are often passed on to consumers. Sales tax is often appliedagain to the sales tax element of the cost, thus there is a problem of tax on tax. This isnot the case with VAT, which makes it a neutral tax as it provides the least disturbanceto patterns of production and the generation and use of income.In addition, the audit trail that exists under the VAT system makes it a more effective taxin administration terms than sales tax as it helps with the verification of VAT amountsdeclared as due. This is made possible by the fact that one person’s output is another’sinput. As with sales tax imports are treated the same way as local goods while exportsare zero- rated to avoid anti-export bias.Notwithstanding the advantages mentioned above, it is worth noting that VAT is aconsiderably complex tax to administer compared with sales tax. It may be difficult toapply to small companies due to difficulties of record keeping and its coverage inagriculture and the services sector may be limited. To cover the high administrationcosts, VAT rates of 10-20 per cent are generally recommended. The equity impact of the relatively high rates have been a cause for concern as it is possible that the poor spend relatively high proportions of their incomes on goods subject to VAT. Thus theconcept of zero VAT rate on some items has been introduced.
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