This action might not be possible to undo. Are you sure you want to continue?
A dissertation work submitted to the Pondicherry University in partial fulfillment of the requirement for the degree of
MASTER OF PHILOSOPHY (COMMERCE)
A. HARIKUMAR (Register No. 2100705)
Under the guidance of Thiru.S.ARAVANAN, ASSISTANT PROFESSOR (SG).
DEPARTMENT OF COMMERCE
SCHOOL OF MANAGEMENT
Kalapet, Puducherry-14 NOVEMBER-2011
S.ARAVANAN, Assistant Professor (SG), Department of commerce, School of Management, Pondicherry University, Puducherry-14.
CERTIFICATE OF THE SUPERVISOR This is to certify that the dissertation entitled “VALUE ADDED TAX SYSTEM”(a study with reference to Thiruvallur District, Tamil Nadu, India) is a bonafide record of research work done by Mr. A.HARI KUMAR and submitted for the award of the degree of Master of Philosophy in Commerce of Pondicherry University. The dissertation is a record of independent research work undertaken by him under my supervision and guidance and that it has not previously formed the basis for the award of any degree, diploma, associateship, fellowship or any other similar title of this or any other university.
Place: Puducherry Date:
Forwarded Dean School of management Head of Dept Department of commerce
Mr. A.HARI KUMAR, M.Phil Scholar in commerce, Department of commerce, School of Management, Pondicherry University, Puducherry-14.
DECLARATION I hereby declare that the dissertation entitled “VALUE ADDED TAX SYSTEM” (a study with reference to Thiruvallur District, Tamil Nadu, India), submitted by me for the award of the Degree of Master of Philosophy in Commerce is a record of original research work done by me under the supervision and guidance of Thiru S.ARAVANAN,(Assistant Professor SG) and that the dissertation has not previously formed the basis for award of any degree, diploma, associateship, or any other similar title.
Place: Puducherry Date: (A.HARIKUMAR)
I extend my heart full gratitude to the Almighty for his blessings showered on me to complete this piece of work. I express my wholehearted thanks to Dr.M.Ramadoss, Dean, School of Management, and director of studies, Pondicherry University. It is from my heart that I express my deep and sincere thanks to my guide and supervisor Thiru. S. Aravanan, Assistant professor (SG) in Department of Commerce, Pondicherry University who inspired me a lot while doing my dissertation. Without his advice, guidance and supervision, I would not have submitted this research work in time; no words are there to express my gratitude to my guide. I am really very proud to have a guide like him. I also express my gratitude to Dr. Malabika Deo, Professor and Head Department of Commerce, Pondicherry University for her encouragement and support for doing M.Phil research work. I am extremely happy to extend my sincere thanks Dr.P.Palanichamy Professor in Department of Commerce, Pondicherry University for his encouragement and valuable suggestions. I thank Dr.P.Natarajan, Professor, Department of Commerce, Pondicherry University for his inspiration. I thank Dr. Dr. G. Shanmugasundaram, Associate Professor, Department of Commerce, Pondicherry University. I thank Dr. D. Lazar, Associate Professor, Department of Commerce, Pondicherry University. My thanks to Mr. Nidheesh, Assistant professor, Department of Commerce, Pondicherry University for his guidance. I thank Dr. P.S. Velmurugan, Assistant professor, Department of Commerce, Pondicherry University.
I thank Dr. S. Shijin, Assistant professor, Department of Commerce, Pondicherry University. I thank to Mr A.N.Veerasalingam Assistant Commissioner of Commercial Tax Department. My sincere thanks to Mr.Lakshmipathy Aassistant Commissioner of Commercial Tax Department. And I thank Mr.Nandhagopal, M/s.Renu and Mr.Maduraipandian the superintendents of Commercial Tax Department. I also thank all my friends and co-researchers who helped me a lot academically. I owe thanks to teaching and non-teaching staff of Pondicherry University. Especially non teaching staff members of Department of Commerce, Pondicherry University. Last, but not least, I thank all those friends who helped me either directly or indirectly in the successful completion my research work. I am greatly indebted to all these persons.
Place: Puducherry Date : A.HARI KUMAR
CHAPTERS I II III IV V BIBLIOGRAPHY ANNEXURE Particulars INTRODUCTION AND DESIGN OF THE STUDY REVIEW OF LITERATURE THEORETICAL FRAMEWORK ABOUT VAT ANALYSIS AND INTERPRETATIONS SUMMARY, FINDINGS AND CONCLUSIONS Page No. 1-10 11-24 25-46 47-87 88-94 95-97 98-108
No. Particulars VAT Payers Demographic Variables 4.15(a) 4.9 4.7 Gender Age Group Marital Status Educational Qualifications Type of Business Annual Turnover Respondents’ Business Age VAT Officials Demographic Variables 4.8 4.15(c) KMO and Bartlett's Test Total Variance Explained Rotated Component Matrix 66 66 68 60 60 62 64 54 55 56 57 58 59 47 48 49 50 51 52 53 Page No.13 Gender Status Age Group Marital Status Education Level Respondents Designation Income Factor Analysis Of VAT Officials 4.10 4.15(b) 4.14(b) 4.3 4.12 4.14(a) 4.14(c) 4.5 4.2 4.11 4.4 4. .14(d) KMO and Bartlett's Test Total Variance Explained Rotated Component Matrix List of factors Factor Analysis Of VAT Payers 4.1 4.ii LIST OF TABLES Sl.6 4.
29 4.21 4.18 4.27 4.24 4.28 4.30 4.34(a) Commercial Tax Department Gross Receipts 4.33 Education and Work burden Designation and Registration Results of Correlation 78 79 4.17 4.20 4.16 4.25 Gender * Work Burden Designation * Work Burden Age Group * Work Burden One Way ANOVA Relating VAT Payers 74 74 75 4.32 4.15(d) List of Factors Cross tabulation results Relating To VAT Payers 68 4.26 4.19 4.23 4.iii 4.31 Age of Business and Work burden Education and Awareness of Exemptions Registration and Incidence of Tax Turnover and Convenience to pay tax Age and business and Tax evasion Turnover and Tax avoidance One Way ANOVA Relating VAT Officials 75 76 76 77 77 78 4.34(b) Correlations 79 80 .22 Gender * Work Burden Education * Work Burden Business * Work Burden Turnover * Work Burden Turnover * Incidence Age of Business * Incidence Education * Rate Knowledge Cross tabulation results Relating To VAT Officials 69 70 71 71 72 72 73 4.
36 4.38 4.iv Result of Paired t-Test 4.43 Commercial Tax Department Gross Receipts (Amount in Crores) Commercial Tax Department Gross Receipts (Amount in Crores) 86 87 83 81 82 82 82 83 80 80 81 .42 4.39 4.40 knowledge of VAT rates VAT or TNGST continue in Tamil Nadu Awareness of proposed GST Assistant from VAT consultant Registration VAT payers’ opinion 4.41 System to continue in Tamil Nadu Revenue collection under VAT 4.35(a) 4.35(b) 4.37 4.35(c) Total Revenue of the Government Paired samples statistics Paired samples test VAT officials’ opinion 4.
8 4.17 Commercial Tax Department Gross Receipts (Amount in Crores) Commercial Tax Department Gross Receipts (Amount in Crores) 86 87 62 67 54 55 56 57 58 59 47 48 49 50 51 52 53 Page No.2 4.9 4.10 4.3 4.v LIST OF FIGURES Sl.11 4.1 4.4 4.16 4. No.5 4.14 4.15 Scree plot of VAT officials Scree plot of VAT payers Revenue collection under VAT 4.12 4. . Particulars VAT Payers Demographic Variables 4.7 Gender Age Group Marital Status Educational Qualifications Type of Business Annual Turnover Respondents’ Business Age VAT Officials Demographic Variables 4.13 Gender Status Age Group Marital Status Education Level Income Respondents Designation Result of Factor analysis 4.6 4.
Indirect taxes are shifted and the incidence of these taxes fall on persons other than the original payers. ii. customs duties etc.1 Introduction: A tax is “a back bone of every country to meet their social obligations. The Objectives of taxation are: Main objectives i. paid by the individuals or businesses to a government (central or local)”. Without tax the government cannot do any social benefit activities. In other words. are a matter of hot dispute in politics and economics. If not. may be grouped as indirect taxes. a sound tax system should contribute to the economic development of a country. Tax can be defined as “an involuntary fee or more precisely.Taxes may be paid in cash or kind (although payments in kind may not always be allowed or classified as taxes in all systems). Generation of revenue Maintenance of welfare state . The general public should be taxed according to their ability to pay. save and invest. Tax imposes a personal obligation on the people to pay the tax if they are liable to pay it. so discussions of taxation are frequently tendentious. The means of taxation. excise duties. Hence tax is compulsory payment or contribution by the people to the government for which there is no direct return to the tax payers. Commodity taxes or sales tax. and the uses to which the funds raised through taxation should be put. Government is the only person to levy tax. and the people in the same financial position should be taxed in the same way without any discrimination (1). it will affect the development of trade and industry and the economy as a whole. “unrequited payment”. But that person succeeds in shifting his burden to others. Hence “taxation should not be like killing the goose that lays golden eggs”. Indirect taxes are those taxes which have their primary burden or impact on a single person. an indirect tax is imposed on one person but is paid partly or wholly by another. A good tax system should not affect the ability and willingness of the people to work. Thus.1 CHAPTER I INTRODUCTION AND DESIGN OF THE STUDY 1.
The Govt. the Government of Madras Presidency earned 8 crore rupees as revenue from the arrack and toddy shops.2 Evolution of VAT Origin: Sales Tax began in India with “petrol tax” introduced by the government of Madhya Pradesh. tax evasion will be checked. resulting in higher revenues to the government. This mechanism ensures that the tax is neutral regardless of how many transactions are involved. It is charged as a percentage of prices. Value Added Tax (VAT) is a general consumption tax assessed on the value added to goods and services. which can have a snowballing effect on prices. Sales tax initiated in Tamil Nadu has been levied throughout India. Over 130 . Accelerate saving and thereby investment Repaid economic development Generation of employment.2 iii. During the year 1939. arrack and toddy shops were functioning in Madras Presidency. was interested in removing the liquor shops and compensate the loss of revenue by levying sales tax. iii. It is not a charge on companies. it is a multi-stage tax. which means that the actual tax burden is visible at each stage in the production and distribution chain. iv. Its purpose is to enable the govt. 1. Prevention of concentration of economic power Re-distribution of wealth for the common good. TNGST is replaced by VAT from the year 2007. Madras Presidency introduced “Sales Tax” in 1939. to all commercial activities involving the production and distribution of goods and the provision of services. Following the Madhya Pradesh “petrol tax”. In other words. It is a general tax that applies. During the British rule. It is a consumption tax because it is borne ultimately by the final consumer. levied only on value added at each stage in the chain of production of goods and services with the provision of a set-off for the tax paid at earlier stages in the chain. levy sales and purchase tax with in Tamil Nadu. Subsidiary objectives i. The objective is to avoid 'cascading'. in principle. It is collected fractionally. ii. via a system of deductions whereby taxable persons can deduct from their VAT liability the amount of tax they have paid to other taxable persons on purchases for their business activities. The Tamil Nadu General Sales Tax Act was enacted in 1959and it is called TNGST Act 1959. It is assumed that due to cross-checking in a multi-staged tax.
The collected data are to be analysed using appropriate statistical tools. VAT consultants and VAT payers.4 Significance of the Study The present study tries to focus on a elaborate explanation about the Value Added Tax in Tamil Nadu.e. For the purpose data has been proposed to be collected from both the sources of primary and secondary. To examine the influence of various factors on the work burden of VAT officials. The data are collected from Commercial Tax Offices. VAT payers in Thiruvallur District in Tamil Nadu.3 Scope of the study This present study concentrates on the level of work burden of business concerns. 1. This study also attempts to focus on the level of Work burden of VAT officials. 1. This study also tries to prove whether the revenue derived from the VAT is more compared to other tax systems like TNGST. VAT officials and VAT consultants in Thiruvallur District in Tamil Nadu only. In the present work study of Value Added Tax with reference to Thiruvallur District. Tamil Nadu.3 countries worldwide have introduced VAT over the past three decades and India is amongst the last few to introduce it. only few researchers have done their research in Tamil Nadu jurisdiction. Though many number of research studies have been undertaken in the area of Value Added Tax system. To study the profile of VAT payers and VAT administrators. India has been undertaken. 1. The growth of revenue appreciation of the Tamil Nadu State Government also has been focused in this study. Secondary data are collected from Tamil Nadu Statistical Reports 2010-11. . For the purpose of primary data suitable questionnaire has been circulated to the respondents in Thiruvallur District. Tax consultancy offices and various shops i.5 Objectives of the Study To study about value added tax system in general.
Similarly Sample respondents for VAT officials and Consultants Groups are selected from the areas of Ponneri. the suitable design will be one that minimizes bias and maximizes the reliability of the data collected and analyzed. and (iv) Experimentation. To examine whether value added tax system helps to revenue appreciation to the government compared to other tax systems like TNGST and finally To find whether VAT system is convenient to the VAT administrators as well as the VAT payers. Research purposes may be grouped into four categories. the researcher will be required to prepare a research design. the function of research design is to provide for the collection of relevant evidence with minimal expenditure of effort. But when the purpose happens to be an accurate description of a situation or of an association between variables..4 To examine the influence of various factors on VAT compliance by VAT payers. 1. (ii) Description.. Kavarai Pettai and Gummudi Poondi of Thiruvallur District. i. But how all these can be achieved depends mainly on the research purpose. Sample respondents for VAT payers Groups are selected from the areas of Ponneri.1 Research Design The research problem having been formulated in clear cut terms. . (i) Exploration. In other words. viz. (iii) Diagnosis. Thus totally 260 respondents are selected. time and money. The preparation of such a design facilitates research to be as efficient as possible yielding maximal information. A flexible research design which provides opportunity for considering many different aspects of a problem is considered appropriate if the purpose of the research study is that of exploration. out of while 130 are in the VAT payers group and the remaining 130 from the VAT officials and consultants.e. 1.2 Sampling Method The method followed for selection of sample respondents is convenient cum judgement sampling. he will have to state the conceptual structure within which research would be conducted.6.6 Methodology 1. Respondents from each area are selected on convenient cum judgement basis. Thiruvallur and some parts of Chennai which comes under jurisdiction of Thiruvallur District.6.
This may not be a major part of data collection but at least. 3. 2. professional magazines.Assertion. The questionnaire of VAT consultants and officials consists of 45 questions. Tax consultancy offices and various shops in Thiruvallur district in Tamil Nadu. in proposing a particular setting.6. The remaining 38 questions are formed with a view that the responses fall under the following classification: 1. 1. The specimen questionnaire are given an appendix I and II.5 Primary data The researcher has used questionnaire as a tool for collecting primary data. statistical report and past records. data on the background and historical context are gathered. 1.3 Study Area The area of study is Commercial Tax Offices.Opinions.6. Both primary and secondary data are used in the work. . The questionnaire of VAT payers consists of 30 questions. out the 45.4 Data Collection Procedure For every qualitative study.5 1. among them the first 9 questions are on demographic base of the respondents. 3.Personalized and 4.6. annual reports. Assertion. 1.Opinions. The remaining 21 questions were formed with a view that the responses fall under the following classification: 1.Personalized and 4.6. In this study the secondary data were collected for the purpose of analysing the revenue receipts of the Tamil Nadu Government from the Tamil Nadu statistical report. The researcher has formulated a questionnaire consisting of 30 questions for VAT payers and 45 questions for VAT consultants and VAT officials and distributed among the 260 respondents. first 7 questions are on demographic base of the respondents. books. Primary data will be collected through well designed questionnaire (five pointlikert scale from strongly agree to strongly disagree) from VAT payers and VAT officials in Thiruvallur Dist at Tamil Nadu. the researcher gathers demographic data and describes geographic and historical particulars. 2.Awareness.6 Secondary Data The Secondary data for this purpose were collected from various journals.Awareness.
Chi-square test of independence. Chi-square test for homogeneity. Contingency tables along with some chi-square statistics are used in such kind of data. SPSS 16. while the test for homogeneity investigates the issue whether several population are homogeneous with respect to particular characteristic.2 Chi square Test Chi-square is one of the very popular methods for testing hypothesis on discrete data. data management. 3.7 Tools Used for Analyses: 1. There are three different types of chi-square analysis: 1. The Chi-square test of independence is used to test the hypothesis that two categorical variables are independent of each other. and complex statistical analysis. The formula is (O E )2 E 2 Where O = the frequencies Observed E = the frequencies Expected . SPSS package consists of a set of software tools for data entry. charts.6 1. The discrete data can be nominal or ordinal. SPSS is a very powerful and user friendly program for statistical analyses. In this research the researcher used the Chi-square test of independence.7.7.1 SPSS Package The abbreviation SPSS stands for Statistical Package for the Social Sciences and is a comprehensive system for analysing data. 2. The chi-square test for goodness of fit determines if the sample under investigation has been drawn from a population. SPSS can take data from almost any type of file and use them to generate tabulated reports. The only summary statistics useful for such data are frequencies and percentages. 1. which follows some specified distribution. Anyone with a basic knowledge of statistics can easily learn how to run very complicated analysis in SPSS with a simple click of the mouse. statistical analysis and presentation.0 version is used in this research for analysing the datum(2). and plots of distribution and trends. Chi-square test for goodness of fit. Finding descriptive statistics for such data is meaningless. descriptive statistics.
3 Analysis of Variance (ANOVA) ANOVA or analysis of variance is used to compare the means of more than two populations. It has wide application in business and statistics (3). If increase in any one variable is associated with decrease in the other variable.7. the two variables are said to be correlated. When the changes in one variable appear to be linked with the changes in the other variable. ANOVA has found extensive application in psychological research using experimental data. the analysis concerning relationship is known as multiple correlations.7. When the two variables are meaningfully related and both increase or both decrease simultaneously.4 Correlation Correlation is a technique which measures the strength of association between two variables. The formula for calculating „F‟ test is SB2 F Sw2 Where F = Ratio of Variance (F Value) S B 2 = between group variance S w 2 = within group variance 1. a small value of X appears with large values of Y. Suppose marks in Mathematics are denoted by X and marks are Statistics are denoted by Y. It is a case of negative correlation. If small values of X appear with small values of Y and large values of X come with large values of Y. then correlation is said to be positive. Where there are two or more than two independent variables. . It uncovers the main and interaction effects of classification or independent variables on one or more dependent variables. the correlation is termed as negative or inverse. Both the variables X and Y may be random or may be that one variable is independent (non-random) and the other to be correlated are dependent. 1. then the correlation is termed as positive. On the other hand.7 ∑ = the sum of 2 = Chi-square value.
.5 Dependent (paired) samples t-Tests In case of independent samples test for testing the difference between means.7. This technique allows the researcher to group variables into factors (based on correlation between variables) and the factors so derived may be treated as new variables and their value derived by summing the values of the original variables which have been grouped into the factor (4). especially pertaining to social and behavioural sciences. it is assumed that the observations on one sample are not dependent on the other. this assumption limits the scope of analysis as in many cases the study has to be done on the same set of elements to control some of the sample specific extraneous factors. is called dependent or paired sample t-Test. Factor analysis.8 1. known as factors. seeks to resolve a large set of measured variables in terms of relatively few categories. thus.6 Factor Analysis Factor analysis is by far the most often used multivariate technique of research studies. However.7. Such experiments where the observations are made on the same sample at two different times. d = Difference between Matched Scores N = Number of pairs of scores 1. error variation. Formula for factor analysis: Y = Xβ + E Where Y= matrix of measured variables X= matrix of common factors β = matrix of weights (factor loading) E = matrix of unique factors. Where.
objectives of the study. . Chapter IV: Represents the detailed Analysis of the primary and secondary data and interpretation with statistical calculations. methodology of the study and limitation of study.9 Chapterization: This study comprises of five chapters. Chapter I: Deals with introduction. The period of the study is only six months. The improper opinion of the respondents may also affect the nature of the results. Chapter V: Presents main findings of the study. The respondents felt unwilling in answering some of the questions as they feel that the opinion would turn against them.9 1. The study is based on the respondents‟ opinion which is based on their attitude. scope of the study. Chapter II: Presents the review of literature relating to the study. 1.8 Limitations of the Study The study concentrates in Thiruvallur district of Tamil Nadu only. suggestions and conclusion of the study. the attitude may change. Chapter III: Gives a theoretical framework about Value Added Tax system and its explanation.
2005. New Delhi-110 044. New Delhi-110 002. Wiley Eastern Ltd. Sultan Chand Publications. 3. http://www. C.com/tutorials/basic-statistics/correlation.Gaur “Statistical Methods For Practice and Research(A Guide to data analysis using SPSS)”.Kothari “Research Methodology (Methods and Techniques)”.10 REFERENCES: 1. Business Books from SAGE Publications Ltd. Second Edition. New Delhi-02.html 4. Ajai S.Balachandran “Indirect Taxation”. . V.emathzone. Response Book.R. 1994.Gaur and Sanjaya S. New Age International Ltd. 2. 10th EDITION.
would be 4. Many researchers in the past had taken up various studies relating to the value added tax in India and elsewhere in other parts of the world.au) Now review of a few related works is given below: Roberto Steiner and Carolina Soto. It plays an important role in countries’ developmental activities.1%.(1) “TAX EVASION AND ELUSION OF VALUE ADDED TAX IN COLOMBIA”-They examine the three aspects to the value added tax in Columbia. (1994).6%. It is the knowledge of research field which allows identifying the gap which the research could fill.11 CHAPTER II REVIEW OF LITERATURE Review of Literature Introduction Tax is a back bone of every country. whereas the total evasion of the tax is 28. they estimate tax evasion and elusion for 1994. This chapter reviews various literatures relating to value added tax. Finally it allows establishing the theoretical framework and methodological focus even if the researcher is proposing a new theory or a new method. Need for review of literature First review of literature demonstrates knowledge about the field. it has recently been declining. the researcher needs to read it critically and to write in such a way that shows the researcher has a feel for the area and also know what the most important issues are and their relevance to his work. (www. Fist they show that although the VATs’ productivity is at an acceptable level according to international standards.uq. This means more than reporting what the researcher is reading and understanding.9%.edu. This is closely connected with demonstrating what the researcher knows about the field. Second. compared to the actual general rate of . Their results indicate that the international VAT evasion rate is 32. the VAT rate that would generate the same amount actually collected in 1994. Assuming that there were neither evasion nor exemptions. It justifies the reason about research.
Michael Keen and Jack Mintz.(2) “VALUE ADDED TAX EVASION.12 14%. and regardless of the expected success rate in auditing of the tax administration. employing an annual time frame analysis. that a VAT is self-enforcing. Transactions matching are shown to have very different effects from auditing: Even when auditing alone is unable to induce non-zero taxpayer reports. conditions under which the VAT leaves input prices undistorted are found and the content of the often made claim. it is shown that a balanced-budget shift from a payroll tax to a VAT will increase employment if the rise in the VAT does not alter consumer prices. If the effects of a shift from SSC to the VAT on the worker's effort are neutralized. for example. the implications for the optimal threshold of the production inefficiencies . (1996). they verify if the tax is really as regressive as theory suggests. the employment impact will depend on the nature of the unemployment compensation system. In the model. The ability of the tax administration to enforce compliance with the VAT is shown to be sensitive to the knowledge that the tax administration has about the production technology. Laszlo Goerke. sufficiently intensive cross matching can induce truthful reporting. AUDITING AND TRANSACTIONS MATCHING” -They examined the impact of enforcement on the revenue effectiveness and efficiency consequences of the VAT. also for 1994. as households are ordered by deciles on a consumption basis instead of an income basis. However. (1999).They develop a simple rule characterizing the optimal threshold in terms of a trade-off between tax revenues and collection costs. Assuming unemployment to be caused by efficiency wages. Finally. It can also distort input use and output decisions even if auditing alone has no adverse effects. (2000).(3) “VALUE-ADDED TAX VERSUS SOCIAL SECURITY CONTRIBUTIONS” -It is a discussion paper in order to alleviate unemployment it is often recommended to reduce social security contributions (SSC) and to compensate for the ensuing loss in revenues by a rise in the value-added tax (VAT). they conclude that the VAT is slightly progressive. It then considers. is explored. Arindam Das Gupta and Ira N. matching leads to distorted purchase and sales transactions. Gang. (4) “THE OPTIMAL THRESHOLD FOR A VALUE-ADDED TAX”. On the other hand. According to the actual expenditure structure and taking into account exemptions and excises. in principle and by simulation. although its progressivity is not monotonic throughout income deciles. the tax becomes clearly progressive. by imposing a constant wedge.
it fails to address investment levels. Finally he concludes. the welfare loss is reduced by half on account of lower final tax rates on consumption. The increase in final consumer prices on account of reduced tax base leads to higher price of essentials. Against this. Zero rating v/s exemption plays an important role on welfare.(6) “THE MACROECONOMIC IMPACT OF THE IMF RECOMMENDED VAT POLICY FOR THE FIJI ECONOMY: EVIDENCE FROM A CGE MODEL”-He uses a computable general equilibrium model to examine the economy wide effects of this VAT policy and find that while the VAT improves government revenue and brings about a small 0. reduce administration and compliance costs.6% increase in real GDP. in particular. Agriculture sector unambiguously plays a crucial role in welfare. Much emphasis is often given. Rege. relative to value added. with lower welfare loss if essential commodities are exempt from VAT. Replacing the old indirect tax structure with a VAT is welfare worsening. (2002). (2003). VAT actually leads to a decline in investments and a reduction in real consumption and national welfare. however. Even a change in tax / subsidy policy of one sector (agriculture) produces a dramatic change in welfare. replacing the old indirect tax structure with a VAT is welfare worsening. When agriculture. which causes welfare loss. He highlights that large amounts of tax revenue are owed to government. One common advantage perceived in the value-added tax. and minimize the distortions arising from the differential treatment of firms above and below the threshold. distributional effects are naturally a major concern. . to the regressive nature of the compliance costs associated with the VAT. The analysis here has focused on the central trade-offs to be faced in choosing the threshold for a VAT: between the desires to increase tax revenue. food and food products and textiles are exempted. for instance (and a common source of resistance to its introduction) is the prospect of its yielding information useful for enforcement of the income tax. The increase in final consumer prices on account of reduced tax base leads to higher price of essentials.(5) “A GENERAL EQUILIBRIUM ANALYSIS OF VAT IN INDIA”-He evaluates the welfare implications of a VAT in the static and a sequentially dynamic context after accounting for the political and administrative constraints facing the Indian government in implementing a VAT. Paresh Kumar Narayan. causing welfare loss. must be borne the competitive advantage enjoyed (at least in respect of sales to final consumers) by those who remain below the threshold. Sameer R. generally thought to be more burdensome. for smaller traders than large.13 implied by the differential treatment of those above and below the threshold. In practice.
The GST is a value-added tax (VAT).55 times the total budgetary expenditures to administer . complicated and confiscatory to the one that is far more efficient. The recent focus on tax administration promises rich dividends. customs and sales taxes.(8) “THE HIGH COSTS OF CONTROLLING GST AND VAT EVASION”. Reform in the sales tax has only just begun and a lot remain to be done to evolve destination-based retail VAT. and Jenkins. much remains to be done to make the tax system broad-based. Although similar schemes are not likely to be directly copied in Canada. The personal income tax continues to be narrow based. GST evasion is a reality. those costs represent a diversion of resources from more productive activities and an economic loss to the country. respectively.M. From that they deduce that the IMF policy is misdirected.(2005). Despite reforms since 1991. Nonetheless. productive and efficient. The reform to convert the state level sales tax into VAT this year is a major initiative. Rao. the authors measure the compliance costs to taxpayers and the administration costs to the tax authorities in those two countries.14 This is three times more than what government will collect from the 25% increase in VAT. In this light. the thrust and direction of reforms have been to improve revenue productivity while minimizing distortions.He examined the Indian tax system has come a long way from the narrow based. for example. (2005).They developed the Canada's goods and services tax (GST) is sometimes said to be self-enforcing--vendors will always charge the tax because purchasers will always want to claim input tax credits. revenue concentration on diesel and petrol has high efficiency costs. Over the years. the authors provide data to show how high compliance and administration costs can go when governments singlemindedly pursue the goal of controlling VAT evasion. Solutions to the problem usually involve increased audits (and therefore increased compliance costs) for taxpayers and increased administration costs for governments. an alternative to VAT is to upgrade government’s tax collecting mechanism.50 and 1. Northern Cyprus and Bolivia. In corporate tax. excise. that will provide the elbow room necessary for calibrating future reforms. In this article. Berhan. Other countries that impose a VAT face similar problems and have proposed various solutions.(7) “TAX SYSTEM REFORMS IN INDIA: ACHIEVEMENTS AND CHALLENGES AHEAD”. 1. refund some of the VAT paid on the purchases for which final consumers have obtained official receipts from sellers. Bahro A. Glenn P. The total VAT compliance and administration costs incurred by Northern Cyprus (in 2003) and Bolivia (in 2002) are estimated at. The reforms in tax administration promise increased revenues and.Govinda. hopefully.
and denial of refunds by governments with cash shortages. the compliance and administration costs of the VAT refund schemes amounted to more than the 5 percent of the total revenues collected by the VAT systems. transitional. they use a computable general equilibrium (CGE) model with detailed specification of South Africa’s tax system.(9) “AN ANALYSIS OF SOUTH AFRICA’S VALUE ADDED TAX” -In this paper. These estimations include the effect of the different rates of the tax . Finally they examine the refund approaches of tax administrations in 36 developing. (2005). Then they evaluate alternative.In this paper they explained a key feature of the invoicecredit form of value-added tax (VAT) is that some businesses— notably exporters—will pay more tax on their purchases than is due on their sales. For the analysis. With this information they estimate the effective rate of tax that has been paid on each item purchased by households. This makes the refund process the ―Achilles heel‖ of the VAT. showing that (1) the VAT is mildly regressive and (2) it is an effective source of government revenue. In both countries. and so can seek refunds of excess credits from government. Graham Harrison and Russell Krelove. Households are disaggregated into income deciles. (2005). While refunding is straightforward in principle.(10) “VATREFUNDS: A REVIEW OF COUNTRY EXPERIENCE”. serious problems arise in practice. Marna Kearney et al.15 the entire domestic tax system. revenue-neutral tax systems in which they reduce the VAT and raise income taxes. compared to other tax instruments in South Africa. they describe South Africa’s value added tax (VAT). They demonstrate that alternative tax structures can benefit low-income households without placing excess burdens on high-income households. It also contains information on the type of establishment from which the items were purchased. (2006). It evaluates the effectiveness of these approaches and suggests a model of best practice that takes into consideration compliance issues faced by countries during different stages of development. and developed countries. including opportunities for fraud and corruption.(11) “IS THE VALUE ADDED TAX NATURALLY PROGRESSIVE?”-This paper employs a rich data set on household incomes and expenditures for the Dominican Republic. Jenkins et al. The data set covers 2042 goods and services purchased by households of different income and consumption levels. Glenn P. They evaluate the VAT in the context of other distortions in the economy by computing the marginal cost of funds—the effect of raising government revenue by increasing the VAT rates on household welfare.
Andrea Gebauer et al. whereas the multiple use of an invoice for fraudulent purposes plays no major role. (2007). then the States would have no revenue base and the federal countries would soon resemble Unitary States. Input-tax reimbursements are now often illegally claimed primarily by the holder of an invoice. this tax is growing in popularity. as well as the fraud potential of using identification numbers. Finally they conclude. State governments are loath to give up their tax bases. whose implementation would open up further possibilities for tax evasion and lead to a considerable increase in administrative costs. France became the first nation to adopt a value-added tax. leading to the fraudulent retention of revenue. have not taken into account the fact that in developing countries the commodities. One of the main problems after a system change would seem to lay in the future coexistence of two VAT systems. on which poor households spend most of their income. (2007). If a federal VAT replaces these taxes. which. As a notable exception. sales taxes and indirect taxes were invariably left to the States in the constitution. and are administratively impractical to tax. all available possibilities to make the present system more fraud-secure should be . But most of the other large industrial nations use it. it is not used by the United States on the federal level. Today. Also. it would be a mistake to overestimate the control possibilities.(13) “CAN REFORM MODELS OF VALUE ADDED TAXATION STOP THE VAT EVASION AND REVENUE SHORTFALLS IN THE EU?”. a notion credited to Maurice Laure.16 compliance across households with different expenditure levels. and about 40 nations use it.(12) “EUROPEAN VAT – GENERAL PRINCIPLES”-In 1954. The elimination of the problems in the current VAT system should not lead to new abuses from which the negative effects on VAT revenue may be just as large or even larger.They examined VAT evasion caused by the growth of carousel fraud has recently led to significant VAT revenue losses in the EU. however. would apply for most enterprises. This study discusses three reform models of the VAT system in Germany. Arvind Ashta. For all these reasons. including all EU member States. even if they are included in the legal tax base. The results of the study show that the burden of the current VAT in the Dominican Republic is progressive over all the quintiles of household expenditure. Carousel fraud works such that intra-EU firms repeatedly carry out cross-border supply and purchase of goods and services. A peculiar reason for not adopting VAT in most of the federal countries is that traditionally. due to the unclear delimitation. before a radical change is made to the VAT system with unforeseeable results.
the ultimate result of each of the two taxes is in principle the same in taxing of the individual consumption. Some like the VAT because it offers a new way to finance bigger government. Thus it revealed that the structures of the sales tax and the VAT are different. Neil. Finally.(14) “THE VALUE-ADDED TAX: ITS CAUSES AND CONSEQUENCES”. This leads to the estimation. Others like the VAT because – at least. . instead of being collected at the cash register. an especially effective form of taxation? To address this. It focused on the questions of when tax is imposed. the VAT is very much a work in progress.(2009).In his research he develops America is one of the few nations without a value-added tax (VAT).17 exhausted. the Pennsylvania sales tax and the Bulgarian VAT share many common features and the differences between them are often subtle. as its proponents claim. as more and more countries continue to adopt it and grapple with ways of improving its design and implementation. what are the tax bases and the applicable tax rate and on the exclusions from the sales tax and the credit method used for VAT purposes. a VAT is a type of national sales tax. on a large panel. In simple terms. The sign of the revenue impact is generally ambiguous. Supporters of limited government oppose the tax because it makes it easier for politicians to expend the size of government.He reviewed and compared briefly the Pennsylvania Sales Tax and the Bulgarian VAT. Michael Keen and Ben Lockwood. it is not evident why the financial means required for the establishment of extensive control mechanisms in a new system could not also be used for the improvement of the present system. However. but most countries that have adopted a VAT seem to have gained a more effective tax instrument in doing so.(16) “VAT: THE ELIXIR FOR AMERICA’S ECONOMIC ILLS?”. this paper first shows that a tax innovation—such as the introduction of a VAT—reduces the marginal cost of public funds if and only if it also leads an optimizing government to increase the tax ratio. of a system of equations describing the probability of VAT adoption and the revenue impact of the VAT. However. Zabov. (2007). but there is growing pressure to impose the language. (2007).They proved that VAT. Lyubomir P. and others. Accordingly.(15) “VALUE ADDED TAX AND SALES TAX (COMPARATIVE OVERVIEW)”. compared to the income tax – it does not impose as much damage on the economy. it is imposed on the ―value added‖ at each stage of the production process. Benjamin A. For these reasons.
the problems if any that they were encountering in using them as well as get possible solutions to the problems. sales.(19) “THE EFFECTIVENESS OF ELECTRONIC TAX REGISTERS IN PROCESSING OF VALUE ADDED TAX RETURNS”. price reduction. shadow economy and employment.(17) “THE REDUCED VAT RATE FOR SMALL BUSINESS IN CROATIA”.(18) “WORLDWIDE VERSUS TERRITORIAL TAX SYSTEMS: COMPARISON OF VALUE ADDED TAX AND INCOME TAX”. The country may choose to impose its income tax or VAT under a worldwide or territorial principle. There exists also some possibility for construction of housing and construction services related to housing as well as some other labour intensive services. To date. In this paper. He compares these systems with the commonly used territorial VATs. the pass-through to prices is very moderate as well as other effects. There are many countries with worldwide and territorial income taxes. geographically. the literature fails to recognize some existing VAT systems as worldwide systems. Survey for Croatia is done by small business owners’ interviews and encompasses descriptive and inferential statistics based on parametric tests.They aimed to assess the effectiveness of Electronic Tax Registers (ETRs) in the processing of Value Added Tax returns. he suggests that at least the New Zealand and South Africa VATs can be analyzed as worldwide VAT systems. Alan Schenk.18 Helena Blazic and Mira Dimitric. (2009). it wants to assert its tax authority.In this paper they developed to assess the potential effects of introduction of the reduced VAT rate for small business. Lumumba Omweri Martin and Bernard M.Obongo. a country generally must decide how broadly. There are many countries that impose territorial VAT systems. but relatively few impose a worldwide VAT system. The study sought to determine the extent to which the Electronic Tax Registers are being used by the taxpayers. The reduced VAT rate could have some positive results for the restaurants and bars only. This paper also raises the question of whether differences in the design of a VAT as a territorial or worldwide VAT represent only differences in form or differences in substance. The analysis includes effects on prices. (2010).In designing an income tax or a VAT. (2009). However. The EU expected existence of a link between VAT reduction. a lot was desired especially in this area to . It starts with the assumption of no substantial effect. sales increase and positive effects on employment (as well as decline in the shadow economy) is proved even in this research. based on the EU VAT legislation development. tax evasion. Since many researchers had concentrated much of their work on tax systems. taxes and interest rates.
Data was collected from 78 registered VAT taxpayers in Kisii town. It investigates in particular whether the presence of a value added tax (VAT) system increases the benefit of the inflows of remittances in terms of high and less volatile tax revenue ratio. middle level and low managers. The study sought to establish if the Electronic Tax Registers had increased the speed at which taxpayers processed their VAT returns and if there were any associated costs in the processing of VAT.(20) “IMPACT OF VALUE ADDED TAX ON TOURISM”. only 68 responded.Here Christian Hubert Ebeke examines the impact of international remittances on both the level and the instability of government tax revenue in receiving countries. Out of the 78 registered VAT taxpayers to whom the questionnaires were administered. in order to achieve the market standards. Data analysis tools used in the research were Excel and SPSS and data was presented in form of tables and graphs. Budget funds collected from tourism need to be refunded to the tourism industry. (2010). One of them is the harmonization of value added tax (VAT) with the requirements of Directive. service providers.19 assess the effectiveness of Electronic Tax Registers had been recently introduced by the Kenyan tax authority. (2010). The population under study comprised of 98 VAT registered taxpayers in Kisii town according to the regional KRA office’s records which was stratified into. VALUE ADDED TAX AND TAX REVENUE IN DEVELOPING COUNTRIES”. which include partly high VAT rate of 23%. The respondents were senior. wholesalers and large scale retailers and supermarkets.(21) “REMITTANCES.They developed Republic of Croatia is currently carrying out preparatory measures for accession to the European Union. Hoteliers in Croatia set aside large funds for facility investments. Christian Hubert Ebeke. Renata Dombrovski and Sabina Hodzic. Strong taxation affects tourism negatively. The findings of this research project will assist the Kenya Revenue Authority look for ways of improving the processing of VAT returns. This gives a response rate of 87% percent. Using a large sample of developing countries observed over the period . It is important to find an optimal solution within the VAT system to encourage tourism development. This is supported by the fact that remittances are largely used for consumption purposes and contribute to smoothing private consumption. Tourists face higher bid prices which puts the country in an unenviable position among Mediterranean competitors. The main instrument of collecting primary data was the questionnaires while secondary data was obtained from the KRA regional office.
profession. Synthesis of review of literature:From the above review of literature relating to VAT the following points emerge: VAT is slightly progressive. conducive to investment.They developed VAT is seen as a prospective substitute of the present tax system. etc. its benefits. The paper suggests that there should be no other state levels taxes such as octroi.The Value Added Tax Accounting (VATA) is one of those newly emerged concepts. It will encourage and result in a better administrated system that will close avenues of tax evasion. although its progressivity is not monotonic throughout income deciles. as households are ordered by deciles on a consumption basis instead of an income basis. politicians etc. If enforced properly it would help in fiscal consolidation for the country.(23) “VALUE ADDED TAX ACCOUNTING: CONCEPTS AND ISSUES”. entry tax etc. same legislation should be there for all states a grace period may be provided are some of the other suggestions paper has submitted. Rawat Deepa et al. simplicity. the tax becomes clearly progressive. Balanced-budget shift from a payroll tax to a VAT will increase employment if the rise in the VAT does not alter consumer prices. . this in turn could be used for reducing the debt burden in due course. as VATA is regarded as a source of stable revenue. the results highlight that remittances significantly increase both the level and the stability of government tax revenue ratio in receiving countries that have adopted the VAT. Shankaraiah and D. Rao. Dr. It would provide a steady source of revenue. states additional tax.20 1980-2006.N. However. VAT is a comprehensive levy covering almost all production in its fold. which emphasized much in the context of VISION 2020 by the industry. (2010). There should be immediate removal of CST. immune to lobbying pressures and ensures the economic growth. The central government must fully take the state governments in confidence before imposing VAT. costs. and even after factoring in the endogeneity of remittances and VAT adoption. administration. business.(22) “MACRO ECONOMIC EFFECTS OF VAT IN INDIA”. academic. which is also evident from the successful introduction of VATA by developed countries. (2010). Thus there should be adequate education of the public and the trading community on the features of VAT. K. The concept and issues are presented in this paper to make the people aware of the VATA and remove the misconceptions or notions about VATA and to draw the attention and participation of the different sections of the society for strengthening the VATA system.
and minimize the distortions arising from the differential treatment of firms above and below the threshold. Large amounts of tax revenue are owed to government. New Zealand and South Africa VATs can be analyzed as worldwide VAT systems. . price reduction. Steps to be taken to make people aware of the VATA and remove the misconceptions or notions about VATA and to draw the attention and participation of the different sections of the society for strengthening the VATA system. that will provide the elbow room necessary for calibrating future reforms. The increase in final consumer prices on account of reduced tax base leads to higher price of essentials. The present research conducted in Tamil Nadu especially in Thiruvallur District focuses on the level of work burden and revenue collection of the State Government officials and also on the concerns of VAT payers. Replacing the old indirect tax structure with a VAT is welfare worsening. This is three times more than what government will collect from the 25% increase in VAT. The EU expected existence of a link between VAT reduction. sales increase and positive effects on employment. very few are conducted in Tamil Nadu in that field. The Kenya Revenue Authority look for ways of improving the processing of VAT returns. Among that few.21 The central trade-offs to be faced in choosing the threshold for a VAT: between the desires to increase tax revenue. The reforms in tax administration promise increased revenues and. But only few researchers did their research about value added tax in India. The remittances significantly increase both the level and the stability of government tax revenue ratio in receiving countries that have adopted the VAT. reduce administration and compliance costs. Research Gap (present study) There are many studies done in the field of value added tax throughout the world. causing welfare loss. hopefully.
An Analysis Of South Africa’s Value Added Tax (World Bank Policy Research Working Paper 3671. Marna Kearney. 16 Issue 6. Rao. 1994) 2. 2004) 5. Graham Harrison and Russell Krelove. Berhan. Auditing And Transactions Matching (Social Science Research Network. Rege.P. 17p) 9. p720-736. Vol. 53 Issue 3. Govinda.A and Jenkins. Tax Evasion and Elusion of Value Added Tax in Colombia (Social Science Research Network. Roberto Ste iner and Carolina Soto. M. Vol. Laszlo Goerke. Sameer R.22 References 1. VAT Refunds: A Review of Country Experience(International Monetary Fund. 2003) 7. Bahro. August 2005) 10. 19p) 8. Sherman Robinson and Karen Thierfelder. The Macroeconomic Impact of the IMF Recommended VAT Policy for the FIJI Economy: evidence from a CGE model (Blackwell Publishing Ltd. Arindam Das Gupta and Ira N. Michael Keen and Jack Mintz: The Optimal Threshold for a Value Added Tax (Journal of Public Economics. 2005) . 2000) 6. 1996) 3. A General Equilibrium Analysis Of Vat In India (Blackwell Publishing Ltd. Tax Reforms in India: Achievements and Challenges ahead (Journal of Asian Economics. Value Added Tax versus Social Security Contribution (Social Science Research Network . Value Added Tax Evasion. Paresh Kumar Narayan. 2005. The high costs controlling CST and VAT evasion (Canadian Tax Journal. Glenn. p993-1011.Aug 1999) 4. Gang. Dec2005.
European Vat – General Principles (2007) 13. Jenkins et al. Is the Value Added Tax Naturally Progressive? (Social Science Research Network 2006) 12. Helena Blazic and Mira Dimitric. 1 (2010). 2007) 16. The Value-Added Tax: Its Causes and Consequences ( International Monetary Fund . 2009 page No 83-114) 18. Andrea gebauer. Glenn P. Value Added Tax And Tax Revenue In Developing Countries (2010) . Zabov. Lyubomir P.2007) 15. Value Added Tax And Sales Tax (Comparative Overview) (Social Science Research Network. vol. 11 pages) 20. Benjamin A. Christian Hubert Ebeke. 2009) 19. The Reduced VAT Rate for Small Business in Croatia (Original scientific paper.9. The Effectiveness of Electronic Tax Registers in Processing of Value Added Tax Returns (African Journal of Business & Management -AJBUMA Vol. Worldwide Versus Territorial Tax Systems: Comparison of Value Added Tax and Income Tax (Wayne State University Law School Legal Studies Research Paper Series No. 10. VAT: The Elixir for America’s economic Ills? (Journal of Finance and Accountancy. Lumumba Omweri Martin et al. Renata Dombrovski and Sabina Hodzic. 2009) 17. Neil. 09-27 December 8. Alan Schenk. Remittances. chang woon nam & Rudiger parsche. 2010) 21. Michael Keen and Ben Lockwood. Arvind Ashta.23 11. Can Reform Models of Value Added Taxation stop the VAT Evasion and Revenue Shortfalls in the EU? (Journal of Economic Policy Reform Vol. Impact Of Value Added Tax On Tourism (International business and economic research journal. March 2007) 14.
Dr. Macroeconomic Effects of VAT in India (Finance India. 2010) . Vol. 24 Issue 2. Kalpna Agarwal And Gunjan.24 22.N. Shankaraiah and D. p493-504) 23. Jun2010. Rawat Deepa Agarwal. Value Added Tax Accounting: Concepts And Issues (Social Science Research Network. K. Rao.
For tax purposes. medicine.1 Introduction of VAT The concept of VAT was first adopted by France in 1954.25 CHAPTER III THEORETICAL FRAMEWORK ABOUT VAT This chapter gives a theoretical background of VAT in general and in Tamil Nadu in particular. and whereas it‟s full brunt is borne by the end consumer. such as a national sales tax.VAT must be paid by every company that handle a product during its transition from raw materials to finished goods. It is not a cost to the producer or the distribution chain member. which would hurt the poor. In fact. On the other hand. . such as labor and equipment. so the tax on food would generally be less than the tax on luxury items like boats. a value is added whenever the value of a product increases as a result of the application of a company‟s factor of production. In recent years. the percentage of tax charged varies based on the necessity of the particular product.2 Concept of VAT Value Added Tax is a consumption tax which is levied at each stage of production based on the value added to the product at the stage. In most cases. 3. VAT has been proposed for use in the United States as a way to simplify business and personal income tax laws. By 2000. opponents argue that VAT would be more complicated to implement than other tax-reform options. some people say that adopting VAT would eliminate tax returns for individuals and make the internal revenue service obsolete. They also worry that it would increase the cost of food. and other necessities. A Value Added Tax (VAT) is a fee that is assessed against business by a government at various points in the production of goods and services-usually any time a product is or value is added to it. It is an indirect tax on the domestic consumption of goods and services except those that are zero-rated (such as essential foods and drugs) or are otherwise exempt (such as exports). Proponents claim that VAT would replace other forms of taxation and reduce the costs of tax compliance. It is levied at each stage in the chain of production and distribution from raw materials to the final sale based on the value (price) added at each stage. 3. it was used by Canada and 40 other industrialized countries. it avoids the double taxation (tax on tax) of a direct sales tax.
the taxable amount is based on the value added at each stage of the process of producing goods and bringing them to market. In general.1. and profits. say that a company that makes shocks buys cotton yarns for Rs. VAT would be calculated as a percentage of the Rs. It is therefore. VAT is somewhat similar to a national sales tax.500 value added by turning cotton yarn into shocks. They also are realigning their organizational structure to meet the challenges of the new system and stakeholders‟ expectations‟. Sales tax department has taken up the challenge to transform their selves and be available for assisting the dealers in complying with the provisions of the law. compliance and equity and therefore. VAT is being a multi point tax. is both dealer friendly and consumer friendly. focused and dynamic department to cater to ever increasing expectations of both the government and the trade and industry.500.500 to its value in terms of labor. With VAT. the shock company would also get credit for the amount of VAT it paid on the purchase of inputs. inevitable that the sales tax department transforms itself into a dealer friendly. Of course.26 For example. VAT is a progressive and transparent system of taxation which eliminates the cascading impact of multiple taxation and set-off principle. envisages an increase in the number of dealers and it is based on the concept of self-assessment and self-compliance.000.1. They are in the process of installing a state-wide networked IT system to computerize entire tax administration and hope to provide online service to the dealers in due course. As an example. like cotton yarn. the total VAT accrued during the production of goods is reflected in the price of items sold to final consumers. depreciation of knitting mechanics. and the two forms of taxation are often compared by governments. An expert claims that VAT entails higher administrative costs but is easier to enforce than a national sales tax. It promotes transparency. In this way. because each reseller along the way usually passes along its VAT costs. . tax is charged when a manufacturer sells to wholesaler and again a wholesaler sells to a retailer. then sells the complete shocks forRs. adds Rs.
The International Monetary Fund (IMF). 3. in fact. At each stage of value-addition. It has held its meeting on 18th June 2004 in which it has unanimously decided that Value Added Tax system would be introduced in all states and union territories with effect from the 1st April 2005(1). forms part of the fiscal consolidation strategy for the country. has believed in accepting and adopting loopholes in any system administered by the state or the Centre. It could.27 3. in its semi-annual World Economic Outlook released on April 9. It has a baggage full of benefits. if enforced properly. At a macro level. In the conference of Chief Ministers of all the states held in November 1999. there are two issues. But apparently that fiscal wisdom died with him. They will also be compelled to keep proper records of their sales and purchases. it will close avenues for traders and businessmen to evade paying taxes. Few advantages of VAT in India are mentioned below. As a result. the tax levied on the inputs can be claimed back from the tax authorities. If a well-administered system comes in. Under the VAT system. . help address the fiscal deficit problem and the revenues estimated to be collected could actually mean lowering of the fiscal deficit burden for the government.3 Necessity of VAT in India India. Industry watchers say that the VAT system. It was Chanakya who first wrote that a government should tax its people like a shepherd shears his flock or a bee gets nectar from a flower. no exemptions will be given and a tax will be levied at each stage of manufacture of a product. expressed its concern over India's large fiscal deficit . which make the introduction of VAT critical for India. Further any globally accepted tax administrative system will only help India integrate better in the World Trade Organisation regime.4 Advantages of VAT Since ages always a reform is made for the benefit in the process of development. Let India not experience the same with VAT.at 10 per cent of the GDP. particularly the trading community. Many sections hold the view that the trading community has been amongst the biggest offenders when it comes to evading taxes. it was agreed that all the states and union territories may implement the Value added tax (VAT). The empowered committee has agreed the broad structure and key features of the legislation on Value Added Tax. the Government of India constituted an empowered committee of State finance ministers in order to monitor the implementation of decision.
such as wholesalers or retailers. it offers all the economic advantages of a tax that includes the entire retail price within its scope. One particular advantage is that of the widening of the tax base by bringing all transactions into the tax net. on the other hand. retailer and consumer have a mutual interest in under declaring the actual purchase price. all the taxes due on the product are lost to the government. Under a retail sales tax. on the other hand. at the same time the direct payment of the tax is spread out and over a large number of firms instead of being concentrated on particular groups. Under other forms of sales tax. Tax charged by one firm is reported as a deduction by the firms buying from it. but the tax-credit feature emphasises and simplifies it and is likely to make firms more careful not to evade because they know of the possibility of cross check. . If retailers do evade. both seller and customer gain by evading tax. If evasion takes place under a sales tax. Therefore. Only on the final sale to the consumer there is no possibility of cross audit. since the deduction system ensures that buyers at earlier stages will be refunded the taxes on their purchases. Secondly. the government will at least have collected the VAT paid at stages previous to that at which the tax was avoided. VAT gives the new government the opportunity to bring back into the tax system all those persons and entities who were given tax exemptions in one form or another by the previous regime. tax will be lost only on their margins because customers that are registered firms gain nothing if their suppliers fail to collect tax.28 (i) Coverage If the tax is carried through the retail level. under VAT it is only buyers at the final stage who have an interest in undervaluing their purchases. under VAT. tax losses due to undervaluation should be limited to the value added at the last stage. they will pay more to the government themselves. (ii) Revenue security VAT represents an important instrument against tax evasion and is superior to a business tax or a sales tax from the point of view of revenue security for three reasons. A significant advantage of the value added form in any country is the cross-audit feature. while if evasion takes place at the final stage the state will lose only the tax on the value added at that point. In the first place. except delay in payment. Cross audit is possible with any form of sales tax. and even if it is not picked up subsequently. if payment of tax is successfully avoided at one stage nothing will be lost if it is picked up at a later stage. Specifically.
This does not seem to be a bad idea at all.29 (iii) Selectivity VAT may be selectively applied to specific goods or business entities. and an effective VAT greatly aids income tax administration and revenue collection. clothes and medicine. although this can create problems for administration and open opportunities for evasion by way of deliberate misclassification. It is interesting to note that when Trinidad and Tobago set out to introduce VAT it chose one of its top income tax administrators as the VAT Commissioner. The credit does not subsidize the purchase of capital goods. In any case VAT recognises and makes room for progressivity by applying no or low rates of tax on essential items such as food.e. observation from around the world has shown that steep tax rates lead to evasion. its burden falls disproportionately on the poor since the poor are likely to spend more of their income than the relatively rich person. There is merit in this argument. In addition the VAT does not burden capital goods because the consumption-type VAT provides a full credit for the tax included in purchases of capital goods. Further. However. i. particularly if it attempts to replace direct or indirect taxes with steep. progressive rates. It must be them. it simply eliminates the tax that has been imposed on (iv) Co-ordination of VAT with direct taxation Most taxpayers cheat on their sales not to evade VAT but to evade personal and corporate income taxes. and which takes place extensively in the area of customs duties. a problem incidentally not peculiar to VAT. The operation of a VAT resembles that of the income tax more than that of other taxes. Revenues will not be sacrificed but would in fact be enhanced as a consequence of the broadened tax base. In addition it allows for steep rates of tax on luxury items. there is now a tendency in most countries to reduce this progressivity of taxes.5 Disadvantages of VAT The main disadvantages which have been identified in connection with the Value Added Tax are: (i) VAT is regressive It is claimed that the tax is regressive. and in the case of income tax act as a disincentive to effort. stressed once again that if properly implemented VAT can ultimately lead to a reduction in overall rates of tax. . 3.
Each of the previous indirect taxes such as customs duties. it is often overlooked that businesses already function with considerable administrative responsibility for a number of laws including the National Insurance Act and the Income Tax Act. As noted before. VAT also allows for the exemption of small businesses from the system. it is worth noting that wherever VAT was introduced one of its effects was the rationalisation and simplification of the previous indirect tax system and its administration. small businesses have to be granted special treatment because of their inability to cope with the requirements of keeping adequate records which larger enterprises can handle at a reasonable cost. tax base. without exception is required to maintain detailed and extensive records of all its transactions. It also means reduction in the number of forms used.30 (ii) VAT is too difficult to operate from the position of both the administration and business. the abolition of a number of alternative indirect taxes releases experienced personnel to focus on a single tax. Under any form of sales taxation. to the typical smaller firms the complexities of the tax and the need for more extensive records (for example. legislation to be applied and returns and accounts with which the business person has to contend. to justify deductions) are likely to prove serious. and since there is an actual benefit to be derived from accounting for VAT paid on input there is an incentive for proper record-keeping. (b)Business It is true that the VAT is collected from a larger number of firms than under any form of income tax or single state sales tax. and administration of the indirect tax system. thereby eliminating the overlapping auditing practices that had plagued those systems. The consolidation and incorporation of numerous indirect taxes into the VAT would simplify the rate structure. However. (a) The administration It is often argued that VAT places a special burden on tax administration. The intent of the special treatment is to reduce the administrative burden on small enterprises. Under the Income Tax (Accounts and Records) Regulations of 1980 every person. but not the taxes that normally . However. Compliance with this will certainly ensure compliance with VAT regulations. purchase tax and excise duties replaced by VAT had its own rate structure as well as a different tax base and separate administrative procedure. In addition.
Around 46 commodities that had social implications. temporary price controls. set up in November 1999. any price consequence is one time only and prices should stabilise thereafter. Problems that came up while implementing the VAT would be looked at by the committee with an open mind. a flat tax on turnover may be applied. It would not have a cascading effect and was devoid stringent penal provisions. the task is really one of double entry bookkeeping and any additional work is hardly ever noticed.5 percent. Out of 550 goods brought under the VAT. (d) VAT favours the capital intensive firm It is also argued that VAT places a heavy direct impact of tax on the labour-intensive firm compared to the capital. including 10 items flexibly chosen by the states. However.1 VAT would not have cascading effect The decision to introduce VAT was taken by the committee comprising finance ministers of 28 states and two union territories. the committee. 270 would incur a mere 4 percent tax and the rest would fall under the general VAT rate of 12. any price increases may be offset by increases in take-home pay.31 would be charged on the goods and services they supply.6 Some reflections on VAT 3. Small dealers with an annual gross turnover not exceeding Rs. This is a real problem for labour-intensive economies and industries. To the extent that they lead to a reduction in income tax. a careful setting of the rate of VAT and the significance of the taxes they replace should generally ensure that there is no increase if any in the cost of living. 3. since the ratio of value added to selling price is greater for the former. The revenue loss at the final link in the commercial cycle is limited only to the value added at that stage. whereas in the case of income tax or sales tax the entire tax is lost. To recover the loss from exemptions. In any case. Recalling the effects made by the centre since 1994 on the VAT. and the introduction of VAT certainly offers such an opportunity. The advantage of VAT would become clear when compared with the multi-point sales tax.intensive competitor. . (c) VAT is inflationary Some businessmen seize almost any opportunity to raise prices. met 90 times to evolve a consensus on the new tax system.6. were exempted. he said. 5lakhs would be exempted from tax. In the larger businesses with proper staff and computers.
by increasing their costs. self-assessment by dealers. To guard against any unforeseen price effects the authorities may consider a tighter monetary policy stands at the introduction of VAT (3).2 Higher Economic Growth Highlighting the importance of the VAT.32 3. surcharge and additional surcharge. 3.3 VAT Effect on Inflation In considering the introduction of VAT. In cases where there was an effect it was a onetime effect that simply shifted the trend line of the consumer price index (CPI). as it provided for a set set-off for input tax as well as tax paid on previous purchases. Compared to other broadly based taxes such as income tax VAT is neutral with respect to choices on whether to consume now or save for future consumption. A survey of OECD countries that introduced VAT indicated that VAT had little or no effect on prices. Economic growth can be facilitated through investment by both government and the private sector. abolition of turn over tax.6.Dasgupta said it would help consumers. reduction in prices. Savings by both parties are required in order to finance investment in a noninflationary manner. traders. industrialists and the government. However there is no evidence to suggest that this is true. This emanates from the facts that consumption as a share of income falls as income rises.6. Although VAT reduces the absolute return on savings it does not reduce the net rate of return on saving. Income tax reduces the net rate of return as both the amount saved as well as the return on that saving are subject to tax. 3.4 Distribution Effects of VAT Value added tax is widely criticised as being regressive with respect to income that is its burden falls heavily on the poor a on rich. rationalisation of the overall tax burden.6. countries are often concerned that it would cause an inflationary spiral. Since VAT does not influence investment decisions on firms. Dr. enhanced transparency and higher revenue growth (2). In this regard VAT may be said to be superior tax in promoting economic growth than income tax. Hence a uniform VAT rate falls heavily on the . its effects on investment can be said to be a neutral.
33 poor a rich. which are usually unable to keep separate records/accounts for sales of differently taxed items. However if. . Equity concerns may also be addressed through other ways. Increased costs of VAT administration as a differentiated rate structure brings with it problems of delineating products and interpreting the rules on which rate to use. consumed by the rich and ordinary products consumed by the poor.g. VAT exemptions may also be granted on goods and services that are consumed mostly by the poor. The use of multiple rates of VAT has however been widely discouraged for various reasons. food. In order to address the regressive nature of VAT the following measures can be taken: The VAT itself can be used to differentiate taxation of consumer items are consumed primarily by the poor such that they pay less or at zero rate or to luxury goods at a higher than standard rate. Significantly increased costs of tax compliance for small firms. This could be in the form of lower basic income tax rates on the poor or some pro-poor expenditure of government. The fact that sometimes it is almost impossible to differentiate between higher quality expensive products-e. which leads to more difficulties in monitoring the compliance. consumption is used as the denominator the impact of VAT would be proportional. A proportional burden would also be demonstrated if lifetime income rather than current income is used. such as other tax and spending instruments of government. outside the VAT system. following the premise that welfare is demonstrated by the level of consumption rather than income. A lifetime income concept considers the fact that many income recipients are only temporally at lower income brackets as their earnings increase. Thus any concession extended may tend to benefit the rich much more then the poor. This criticism is valid when VAT payments are expressed as a proportion of current income. This results in the use of presumptive methods of determining the tax liability.
The rationale behind exemptions is to reduce negative distributional effects on incomes. in practice VAT is likely to generate more revenue for government a sales tax since it is administered on various stages on the production- .7 Why VAT is preferred over Sales Tax While theoretically the amount of revenue collected through VAT is equivalent to sales tax collections at a similar rate. If exemptions are granted at prior to final sale.e. Un-recovered taxation of some intermediate goods may lead to procedures substituting away such inputs thus distorting the input choices of the said procedures. tax avoidance by vertical integration. This arises from the fact that each gives rise to pressures on further exemption. Exemptions may create incentives to “self supply” i.5 VAT exemptions Exemptions refer to situations where output is not taxed but taxes paid on inputs are not recoverable.34 The higher compliance cost resultant from differentiation of VAT rates may also be regressive with respect to income since smaller firms with lower income tend to bear proportionately more of the burden a do larger firm. For example creating an exemption to reduce the tax burden on a particular commodity or goods may lead to increased pressure for exemption or zero rating of inputs used for the production of such a commodity. it is important that care is taken when introducing exemptions in order to avoid distortions in the production process as well as to minimise revenue loss resulting from such distortions.6. Based on the above. Given the fact that the primary purpose of VAT is to raise government revenue in an efficient manner and with as little distortions of economic activity as possible. distribution effects are perhaps better addressed by other forms of tax and government expenditure policies which can often be better targeted at these aims. 3. it results in a loss of revenue since value added at the final stage escapes tax. Exemptions tend to feed on each other giving rise to a phenomenon called “exemption creep”. 3. The effect exemption may also be as follows: Falling of revenues-exemptions break the VAT chain.
thus there is a problem of tax on tax. the tax audit trail that exists under the VAT system makes it a more effective tax in administration terms than sales tax as it helps with the verification of VAT amount declared as due.35 distribution chain. particular commodities may not yield any tax. Only at consumption stage where there are no further transactions will there be no tax credits. At each intermediate stage credit will be given for tax paid on purchases to set against tax due on sales. Lack of input credit facility in sales tax often results in tax on inputs becoming a cost to business which are often passed on to consumers. even if final retailers evade the tax net. VAT is also a fairer tax a sales tax as it minimises or eliminates the problem of tax cascading. However. To cover the high administration costs. As with sales tax imports are treated the same way as local goods while exports are zero-rated to avoid anti-export bias. This is not the case with VAT. This is made possible by the fact that one person‟s output is another‟s input. if final sales are not covered by the tax system e.g. due to difficulty of covering all the retailers. The equity impact of the relativity 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. which often occurs with sales tax. In addition. Sales tax is often applied again to the sales tax element of the cost. VAT rates of 10-20 percent are generally recommended. it is worth that VAT is a considerably complex tax to administer compared with sales tax. These are facilitated by the fact that VAT operates through a credit system so that tax is only applied on value added at each stage in production.distribution chain. Not withstanding the advantages mentioned above. With sales tax. There is also in-built pressure for compliance and auditing under VAT since it will be in the interest of all who pay taxes to ensure that their eligibility for tax credits can be demonstrated. with VAT some revenue would have been collected through taxation of earlier transactions. It may be difficult to apply to small companies due to difficulties of record keeping and its coverage in agriculture and the services sector may be limited. Thus the concept of zero VAT rate on some items has been introduced (4). which makes it a neutral tax as it provides the least disturbance to patterns of production and the generation and use of income. .
It eliminates cascading impact of double taxation and promotes economic efficiency. The design of Tamil Nadu State VAT is generally guided by the best international practices with regard to legal frame work. VAT has other advantages for both business and government. It widens the tax base and promotes equity. . mechanism resulting in better compliance.36 3. as well as operating procedures. The consensus has been arrived at through the discussion in the empowerment committee of state finance ministers on implementation of state level VAT. VAT is levied on sale of goods including intangible goods. self-assessment system with more trust put on dealers. It has an improved control. It is primarily a self-policing. With introduction of VAT. VAT is a modern and progressive taxation system which avoids double taxation. the sales tax department has moved to a globally recognized sales taxation system that has been adopted by more than 130 countries. supported by the Tamil Nadu Value Added Tax Rules (TNVAT Rules). VAT in Tamil Nadu is levied under a legislation known as the Tamil Nadu Value Added Tax Act (TNVAT Act). primarily that of double taxation.8 Background of VAT in Tamil Nadu Tamil Nadu is one of the 21 states which have introduced the Value Added Tax (VAT) system of taxation from 1st April 2007. VAT replaced the single point tax which had a number of disadvantages. It is invoice based. In addition to offering the possibility of a set-off tax paid on purchases. It provides the potential for a stronger manufacturing base and more competitive export pricing. Another key factor in preparation of the design of state level VAT is the national consensus on certain issues. On 1st April 2007. and as a result it offers a better financial system with less scope of error.
Example The following shows how the VAT works through the chain from manufacturer to retailer. the selling price of goods and tax on the sale.37 3.000 7.000 1.9.1 How VAT works When a dealer sell goods.9 Explaining the VAT procedure in Tamil Nadu 3. shopkeeper C buys some of utensils and purchases packing. The tax payable on sales is to be calculated on the selling price.000 1. The tax is payable to the state government.500) 5.500 2.50.000/@5% Loss set off (Input Tax Credit) (2.00. material from vendor D.500 VAT @5%(in Rs) . The tax paid on purchases supported by a valid tax invoice is generally available as set-off (input tax credit) while discharging the tax liability on sales.000 Net VAT amount to pay with the return (Note: Tax invoice issued by company A will show sale price as 50. (The sale and purchase figures shown in the example are excluding tax) Particulars Amount (in Rs) Company A Cost of iron ore and consumables Sale of unpolished stainless steel utensils Value added Company A liable to pay VAT on Rs.1. Company A buys iron ore and other consumables and manufactures stainless steels utensils. another firm B buys the utensils in bulk from company A and polishes them. the sale price is made up of two elements.50. packages them and sells the packed utensils for the public.
000 11.000 126.96.36.1990/-) Firm B Purchases unpolished stainless steel utensils Sells polished stainless steel utensils Value added The firm B is liable to pay VAT on Rs.tax as Rs.25.000 188.8.131.52.2.000/.000 2.500 Vendor D .000 1. 1.500) 1. Therefore.38 Rs.000 @5% But can claim set off tax paid on purchases Net VAT amount to pay with the return Shop keeper C Purchases polished stainless steel utensils Packing material Total purchases Sales Value added Shop keeper C is liable to pay VAT on Rs.1.500/-.1.9.25.000/@5% Set off of tax paid on purchases (Rs.50.000 9.000+Rs250 of packing Material) Net VAT amount to pay with the return 2.000 9. the total invoice value will be Rs.250 1.000 5.000 (7.7.250 1.50.000 30.
2. in this case. i.250 Thus.000/- 11.000 250 11.25..000 1. who is not a registered dealer. 2. .000 250 The VAT due on the Value Added through the Chain. Since set-off of tax on purchases is given only on purchases from registered dealers.250 The state government received the tax in stages.@5% Nil 5. The payments of tax were as follows: Particulars Suppliers of company A Company A Firm B Shopkeeper C Vendor D Total Amount in Rs.5.5% on Rs. the tax is finally borne by the ultimate consumer. through a chain of tax on sale price and set off on purchase price.000/. importers. people who buy utensils from the shopkeeper C.000 5.e. In practice.39 Tax paid costs Sales Value added Vendor D is liable to pay VAT on Rs.500 5. inter-state purchases and purchases from registered dealers without separate tax collection are not entitled to set-off.500 2. the cascading impact of tax is totally eliminated.
eggs.5% Other than items specified in schedules A. New VAT rates: (from 11th July 2011) There are two main rates of VAT 5% and 14. notified information technology products and few essential items D 12. (i. eggs. bread and candles etc.e. bread and candles etc.5%. milk. notified industrial Illustrative items inputs.B and C. Raw materials. milk.2 Rates of Value Added Tax Old VAT rates: (till 11th July 2011) There are two main rates of VAT 4% and 12.5%.e. exempted goods form VAT) B 1% Precious metals and precious stones and worn-out or beaten jewellery C 4% Agriculture implements not operated manually or not driven by animal. exempted goods form VAT) B 1% Precious metals and precious stones and worn-out or beaten jewellery . The goods are grouped into four schedules as under: Schedule Rate of tax A 0% Vegetables. (i.9.40 3. The goods are grouped into four schedules as under: Schedule Rate of tax Illustrative items A 0% Vegetables.
Agriculture implements not operated manually or not driven by animal, Raw materials, notified industrial inputs, notified
information technology products and few essential items D 14.5% Other than items specified in schedules A,B and C.
3.9.3 Calculating Tax Liability In, order to calculate how much tax a dealer has to pay, he must, first determine his turnover of sales and turnover of purchases. The second stage is to ascertain the amount of tax due for payment. Calculation of turnover and purchases The turnover of sales is the total of the amounts received or receivables (excluding VAT charged separately) in respect, of the sale of goods, less the amount refunded, within six months of the date of the sale. Similarly, the turnover of purchase is the total number of the amounts paid or payable (excluding VAT charged separately) in respect of the purchase of goods less (the amount repaid in respect of goods they return) within six months of date of purchase. Credit notes and debit notes If the sale price, or the purchase price, of any goods is varied and either a credit note or a debit note is issued, then the credit note or the debit note, as the case may be, should Show separately, the tax and the price Be accounted for in the period in which the appropriate entries are made in their books of accounts.
Auctioneers If dealer is an auctioneer, then they must include in their turnover, the price of the goods they auction for their principal.
Hotels There are special rules for hotels and other establishments that provide boarding and lodging for an inclusive amount. The rules provide a formula to enable them calculate their turnover of sales for meals (food and beverages) which they provide. The supply of food in a restaurant also includes an element of service. But the full amount charged is the sale price for the purposes of calculating turnover and tax. Work contracts VAT applies only to the sale of goods. Supply of services is not liable to VAT. Works contracts are deemed sales where both, goods and services are provided in a transaction and cannot be separated. A works contract may involve the creation of immovable property, e.g. house, a factory or a bridge. Some other examples of works contracts are photography, repairs and maintenance etc. To calculate the amount a dealer should include in their sales, so that they may deduct it from the total contract price, the Costs of labour and service charges. Amount paid to sub-contractors. Charges for planning and designing, and any architect‟s fees. Hiring charges for machinery and tools. Cost of consumables, such as, water, gas and electricity. Dealer‟s administrative costs relating to labour and services and any other similar expenses. Any profit element that relates to the supply of labour and services. Alternatively, in lieu of the deductions as above, a dealer may choose to discharge the liability arising on works contracts by referring to the table prescribed in the rules. If the dealer finds that it is too complicated to calculate that deductions, then they may option for a composition scheme for any works contract. 3.9.4 Difference between tax free goods and exempted goods It is sometimes confusing to have goods that are tax free and sales that are exempt. Both result in reduction on VAT being charged, so what is the difference. Tax free goods do not attract tax at any stage of sale or in any type of transaction, whereas, exempted sales are certain types of transactions, viz., export sales which are exempt from tax.
3.9.5 Records and Accounts Keeping records Proper records are an essential part of effective management and control of their business. Dealers are required by law to keep a true and accurate account of the transactions effected by them. This will also help them to correctly quantify their tax liability or refunds, as the case may be. Thus dealers should keep all their accounts, registers and documents relating to their stocks of goods, purchases, sales and deliveries of goods, at their place of business. If they wish to keep them at a different location they may do so, but only if they have the permission of the commissioner of sales tax. Nature of Records Normally, the department will not expect them to keep any special records for VAT purposes. However, the records that they do keep should have sufficient details to enable them to correctly calculate the amount of VAT due for payment and file their return. If sales tax office happens to find that their records are not properly maintained, then they will issue a notice, informing dealers about what records they must keep. A dealer should maintain the following records To identify the nature and value of goods purchased and sold; Distinguish between:Local sales, interstate sales and exports. Local purchases, interstate purchase and imports. Indicate value of:Sale and purchase of tax free goods. Sales exempted from tax. Purchases from Un Registered Dealer Rate-wise purchases and sales. Local purchases from registered dealer with VAT shown separately. Record payments for the purchases and sale of goods in cash book/ bank book. Include a summary of VAT paid separately on purchases, VAT charged on sales, VAT paid to the state treasury and VAT refundable/refunded to the dealers. Contain adequate proof that goods have been exported or imported.
Dealer name . and copies of invoices. if a dealer is a composition dealer other than a works contractor. Date of issue. address and registration number (TIN). The name and address of the purchaser. Date of the issue.6 Tax Invoices and Memoranda of Sales or Purchases As a registered dealer. Dealers name. If a dealer issues a bill or cash memorandum. And it must also sign either by dealer or by someone who is authorized by the dealer. Rate and amount of tax charged and indicated separately. Tax invoice must contain The words “tax invoice”. printed in bold letters at the top or at a prominent place. issued for goods sold.44 Be supported by invoices for all goods purchased. 3. printed in bold letters at the top or at a prominent place. they should issue a tax invoice when they sell goods to another registered dealer and charge VAT. address and the registration number of the purchaser. Prescribed declaration regarding validity of the registration and payment of tax. . Serial number of the invoice. it must contain:Words „bill/cash memorandum‟. For sales made to consumers and unregistered dealers.9. If a dealer is „a composition dealer (other than works contractor) then the word composition dealer at the top of the bill/ cash memorandum. However. The name. Description of goods. and bills or cash memoranda. they must issue a bill or cash memorandum only and not a tax invoice or a bill or cash memorandum. they must issue a tax invoice. Serial number of the bill/ cash memorandum. the quantity and price of the goods sold. or a bill or cash memorandum. address and registration number (TIN).
. It must sign either by dealer or by someone who is authorized by the dealer. the value added tax system has been adopted by different nations across the world. due to the ease of payment and ready comprehensibility. for goods that are imported and consumed in a particular state.10 Conclusion India already has a system of sales tax collection wherein the tax is collected at one point (first/last) from the transactions involving the sale of goods. the quantity and price of the goods sold. the sales tax department has moved to a globally recognized sales taxation system that has been adopted by more than 130 countries. the first seller pays the first point tax. With introduction of VAT. be collected in stages (instalments) from one stage to another. Prescribed declaration regarding validity of the registration and payment of tax. VAT is intended to be levied-or charged-whenever there is some value addition to raw material. VAT would. however.45 Description of good. and the next seller pays tax only on the value-addition done . In Tamil Nadu VAT has been introduced in 2007 and has been successfully implemented since then. The mechanism of VAT is such that. Tamil Nadu is one of the 21 states in India which has introduced the Value Added Tax (VAT) system of taxation from 1st April 2007. Not surprisingly. 3.leading to a total tax burden exactly equal to the last point tax.
caindia. Purohit.C “Adoption of State Value Added Tax in India: Problems and Prospectus”.M.com/taxation/necessity_of_vat_in_india.2008/state_rule_vat_rate_hike_for_nov_. http://www. http://finance.oecd.46 REFERENCES: 1. Economic and Political Weekly.indiamart.html 3.org/ctp/vatguidelines 4. .org/news/4. www.html 2.
.e.0 (Source: Primary Data collected from business firms i.1 16.1 ANALYSIS OF DEMOGRAPHIC VARIABLES OF VAT PAYERS Table #4.1 shows 108 respondents are male (83.1 Table Showing the Gender of the Respondents Gender Male Female Total Frequency 108 22 130 Percent 83.9%). The collected data are processed.9 100. analyzed and the results are furnished in the following tables: 4.1 150 100 50 0 Male Female Interpretation Among the 130 respondents Table # 4. VAT Payers) The above data are presented diagrammatically in Fig # 4.1%) and 22 are female respondents (16.47 CHAPTER IV DATA ANALYSIS AND INTERPRETATION This chapter analysis the data collected from 130 VAT payers and 130 VAT officials.
7%).0 (Source: Primary Data collected from business firms i. Young Entrepreneurs. 74 in the age group of 20 to 29 years (56.48 Table # 4.e. 23 in the age group of 40 to 49 years (17.3 100. Thus 74% of respondents are in the age group of 20 to 29 years.8 2.9%). VAT payers) The above data are presented diagrammatically in Fig # 4.2 it can be seen that 1 respondent is in the age group of below 19 years.9 21.2 Table Showing the Age Group of Respondents Age Group Up to 19 years 20 to 29 years 30 to 39 years 40 to 49 years 50 to 59 years Above 60 years Total Frequency 1 74 28 23 1 3 130 Percent 0. 28 in the age group of 30 to 39 years (21. .5%). and 4 in the age group of above 50 years.5 17.e.8 56.7 0.2 80 70 60 50 40 30 20 10 0 Up to 19 years 20 to 29 years 30 to 39 years 40 to 49 years 50 to 59 years Above 60 years Interpretation Table # 4. i.
.7% are married.3 Table Showing Marital Status of Respondents Marital Status Single Married Total Frequency 55 75 130 Percent 42.5 2 2. This tallies with the age group profile that 56. 75 Interpretation Table # 4.7 100.3 shows that 43.3% of respondents are unmarried and 57.49 Table # 4.5 1 1. VAT payers) The above data are presented diagrammatically in Fig # 4.3 Marital status 80 70 60 50 40 30 20 10 0 0 0.9% of respondents are in the age group of 20 to 29 years.5 Single.e.0 (Source: Primary Data collected from business firms i. 55 Married.3 57.
8 5.7 43.9 9.4 Education Others Professional Degree Post Graduate Graduate Up to 12th std 0 10 20 30 40 50 60 Interpretation Among the 130 respondents 43. .e.50 Table # 4. Thus the majority respondents are graduates and post graduates (52.7% are below 12th standard.2 3.9% are graduates.8% are professional degree holders and 5.2% are post graduates.2%).0 (Source: Primary Data collected from business firms i.4% come under the category of others. 37. 9.4 100. 3.4 Table Showing Educational Qualifications of Respondents Education Up to 12th std Graduate Post Graduate Professional Degree Others Total Frequency 49 57 12 5 7 130 Percent 37. VAT payers) The above data are presented diagrammatically in Fig # 4.
11 .0 (Source: Primary Data collected from business firms i. 12 Automobile Shop.51 Table # 4.5 Table Showing the Type of Business of Respondents Type of Business Pharmacy Shop Provisional Store Electrical and Electronics Shop Fancy Store General Merchant Textile Foot wear Jeweler Shop Automobile Shop Hard ware Others Total Frequency 13 20 6 8 12 7 10 8 11 17 18 130 Percent 10. 13 Others.5 13.0 15.4 7. 20 Electrical and Electronics Shop.6 6.8 100.5 Pharmacy Shop. 18 Hard ware. VAT payers) The above data are presented diagrammatically in Fig # 4.7 6.2 9.4 4.e. 10 Textile. 17 Provisional Store.1 13. 6 Fancy Store.2 5. 8 Foot wear.2 8. 8 Jeweler Shop. 7 General Merchant.
60 out of 130 respondents annual turnover is Rs. general merchant. and 7 .12.0 (Source: Primary Data collected from business firms i. and pharmacy shop owners respectively. Table # 4.6 Table Showing Annual Turnover of Respondents Annual Turnover 1-10 Lakhs 10-20 Lakhs 20-30 Lakhs 30-40 Lakhs 40-50 Lakhs 50-60 Lakhs Total Frequency 60 30 11 6 16 7 130 Percent 46.10 to 20 lakhs.6 12.2 23.40-50 lakhs.e. automobile shop. VAT payers) The above data are presented diagrammatically in Fig # 4. 16 respondents turnover is Rs. 10. 17 respondents are hard ware owners.0 8.5 revels 20 respondents are provisional store owners.5 4.52 Interpretation Table # 4.1-10 lakhs.6.3 5.4 100. 30 respondents turnover is from Rs.6 50-60 Lakhs 40-50 Lakhs 30-40 Lakhs 20-30 Lakhs 10-20 Lakhs 1-10 Lakhs 0 10 20 30 40 50 60 Interpretation As per table # 4.13 respondents are foot wear.11. Thus the VAT payers do a variety of business and not concentrated on as single business.
7 shows 53 respondents are doing business for 0-5 years. Table # 4.3 100. VAT payers) The above data are presented diagrammatically in Fig # 4.3 14.7 0-5 Years 5-10 Years 10-15 Years 15-20 years More than 20 Years Interpretation Table # 4. 19 respondents for 15-20 years.50-60 lakhs.2% of respondents are small traders with an annual turnover falling in the range of Rs.8 30.0 (Source: Primary Data collected from business firms i. 16 respondents for 10-15 years and only 3 respondents out of 130 are doing business for more than 20 years.0 12. Thus out of 130 respondents nearly 41% of respondents are relatively new to business world.e.7 Table Showing Respondents’ Business Age Age 0-5 Years 5-10 Years 10-15 Years 15-20 years More than 20 Years Total Frequency 53 39 16 19 3 130 Percent 40.6 2. 46.1-10 lakhs. 39 respondents for 5-10 years. .53 respondents turnover is Rs.
2 ANALYSIS OF DEMOGRAPHIC VARIABLES OF VAT OFFICIALS Table # 4.8 Gender Female Female. .8% of respondents are male i. 70 55 60 65 70 75 Interpretation Out of the 130 respondents 53.0 (Source: Primary Data collected from VAT officials and consultants) The above data are presented diagrammatically in Fig # 4.2%.e.46.70 respondents and 60 of 130 respondents are female i.e. Thus major portion of respondents are male members. 60 Male Male.54 4.2 100.8 46.8 Table Showing Gender Status of Respondents Gender Male Female Total Frequency 70 60 130 Percent 53.
9 shows that nearly 15% of respondents are young officials falling in the age group of 20-29 years.7 29.9 Table Showing Age Group of Respondents Age Group 20-29 Years 30-39 Years 40-49 Years 50-59 Years Total Frequency 19 37 36 38 130 Percent 14. 56% of them are middle aged officials falling in the age group of 30-49 years and 29% of the respondents are senior officials in the age group of 50-59 years.5 27. .9 50-59 Years 40-49 Years 30-39 Years 20-29 Years 0 5 10 15 20 25 30 35 40 Interpretation Table # 4.55 Table # 4.6 28.2 100.0 (Source: Primary Data collected from VAT officials and consultants) The above data are presented diagrammatically in Fig # 4.
.4%).10 Marital status 120 100 80 60 40 20 0 Single Married 19 111 Interpretation The majority respondents are married i.0 (Source: Primary Data collected from VAT officials and consultants) The above data are presented diagrammatically in Fig # 4.e.4 100.6 85.56 Table # 4.10 Table Showing Marital Status of Respondents Marital Status Single Married Total Frequency 19 111 130 Percent 14. 111 out of 130 (85.
e. . These respondents belong to clerical cadre and also include assistants to tax consultants.6 3.11 Up to 12th STD Graduate Post Graduate Professionals Others Interpretation Table # 4.7 22.11 Table Showing Education Level of Respondents Education Up to 12th STD Graduate Post Graduate Professionals Others Total Frequency 29 62 29 6 4 130 Percent 22.11 reveals that 62 respondents out of 130 (i.0 (Source: Primary Data collected from VAT officials and consultants) The above data presented diagrammatically in Fig # 4.1 100.7%) are graduates. Only 22% of respondents have an educational qualification up to 12th standard.3 4.3 47.47.57 Table # 4.
58 Table # 4. Hence the majority respondents among VAT administrators are Assistant Commercial Tax Officers. 41 Professional Carde.9 16.5 100.1 32.12 Designation 45 40 35 30 25 20 15 10 5 0 Assistant Commercial Tax Officer. 9 Professional Carde Assistant Commissioner Commercial Tax Officer.12 Table Showing Respondents Designation Designation Professional Cadre Assistant Commissioner Commercial Tax Officer Assistant Commercial Tax Officer Tax Analyst Total Frequency 9 21 17 42 41 130 Percent 6. 21 Tax Analyst.3 31. 17 Commercial Tax Assistant Officer Commercial Tax Officer Tax Analyst Interpretation 42 respondents out of 130 are Assistant Commercial Tax Officers. 41 respondents are tax consultants. 42 Assistant Commissioner.2 13.0 (Source: Primary Data collected from VAT officials and consultants) The above data are presented diagrammatically in Fig # 4. . 21are Assistant Commissioners and 17 respondents are Commercial Tax Officers.
and only 7% respondents earn Rs.1 6.13 140 120 100 80 60 40 20 0 1-4 Lakhs 4-8 Lakhs Interpretation Table # 4. .9 100.0 (Source: Primary Data collected from VAT officials and consultants) The above data are presented diagrammatically in Fig # 4.1-4 lakhs per annum.59 Table # 4.4-8 lakhs per annum.13 Table Representing the Income of Respondents Income 1-4 Lakhs 4-8 Lakhs Total Frequency 121 9 130 Percent 93.13 shows 93% of respondents earn Rs.
302 2 3.008 33. Since the KMO value is 0. Table # 4.434 435 . Table # 4.683 43.5 to 0.627. Bartlett's Test of Sphericity Approx.3 RESULT OF FACTOR ANALYSIS OF VAT OFFICIALS Factor analysis is used to reduce the number variables as one factor. the overall MSA for the set of variables included in the analysis was 0.14(a) KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy.224 24.048 Rotation Sums of Squared Loadings Total 4.008 6. it is actually .674 9.952 % of Cumulative Component Total Variance % Total 1 6. values between 0.9 are great and values above 0.508 8.8 are good.810 .553 2.5 is acceptable.302 33.224 8.8 to 0.810 21.674 9.802 43.14 (a) The Kaiser-Meyer-Olkin (KMO) and Bartlett's test.000.627 2.5 for a satisfactory factor analysis to proceed.Kaiser recommends the accepting value greater than 0.008 12. which exceeds the minimum requirement of 0.9 are superb.000 The table # 4. In fact.365 Cumulative % 21. . This means that the correlation matrix is not an identity matrix.008 12.733 32. In addition. The KMO measures the sampling adequacy which should be greater than 0.50. That is. its associated probability is less than 0.60 4.14(b) Total Variance Explained Initial Eigen values Extraction Sums of Squared Loadings % of Variance 21.802 3 2.7 to 0.466 % of Variance 16.219 Cumulative % 16.7 are mediocre.683 3.05.048 2. it can be seen that the Bartlett's test of sphericity is significant. Chi-Square Df Sig.001. Values between 0. which satisfies this requirement.627 it shows the mediocre adequacy.365 21. values between 0. From the same table.867 2. The probability associated with the Bartlett test is <0. Principal component analysis requires that the probability associated with Bartlett's Test of Sphericity be less than the level of significance.
487 4. there were 9 Eigen values greater than 1.184% and ninth 3.212 1. The point of interest is where the 10curve starts to flatten. the eighth 4. Since the SPSS default is to extract the number of components indicated by the latent root criterion. The graph is useful for determining how many factors to retain.473 4.473%.184 3.245 7.861 6. It can be seen that the curve begins to flatten between factors 9 and 10.646 67. The latent root criterion for number of factors to derive would indicate that there were 9 components (factors) to be extracted for these variables. the forth 7. Table # 4.135 69.648 7.861 6.909 2. the third 9.753 2.027 1.307 50. Using the output from iteration 9.676 2.174 2.14 is a graph of the Eigen values against all the factors.646 7 1. Notice that the first factor accounts for 21.589 7. the seventh 4.158 5.692 7.847 62.554 1.861%.158%.0.540 47.768 .464 50.501 83.487%.14 (b) reveals the factors extractable from the analysis along with their Eigen values. The scree plot figure # 4.493 40. and the cumulative variance of the factor and the previous factors.183 74. so only nine factors have been retained .473 4.676 Extraction Method: Principal Component Analysis.559 2.464%.048 5.255 9 1.027 71.365%.065 7.114 1.158 5.277 2.070 62.184 3.487 4.212 74.554 67.039 10 11 12 13 . the cumulative proportion of variance criteria can be met with 9 components to satisfy the criterion of explaining 60% or more of the total variance. It may also be noted that factor 10 has an Eigen value of less than 1.464 3.039 77.847 6 1.825 55.072 2.61 4 2. In addition.060 85.185 2. the percent of variance attributable to each factor.008% of the variance.342 71.067 1.909 57. the second 12. All the remaining factors are not significant. the sixth 5.921 .067 62.674%.255 74.747 80. our initial factor solution was based on the extraction of 9 components.367 7.342 8 1.358 5 1.284 7.119 2.358 57. the fifth 6.676 1.826 .
761 .689 .663 2 3 4 5 6 7 8 9 .847 .14 Table # 4.62 Scree Plot figure # 4.739 .14(c) Rotated Component Matrix Component 1 Economic Reform Convenient Mechanism Transparency Fiscal Responsibility Evolution .761 .
596 . Registration.797 .746 . Rotation Method: Varimax with Kaiser Normalization.845 .825 . . Convenient.759 . Collection and Coverage.754 . the information in 30 of the variables can be represented by 9 components. Transparency. Revenue Security.702 .14 (b) Rotated Component Matrix.586 .63 Registration Revenue Security Tax Loss Good Economy Coverage Facilitate To VC Growth Procedures Conditions Work Burden Penalty System Lack Of Clarity Reduce A and E Educational Visit Bookkeeping Voluntary Compliance TIN Filing Return RVAT Appropriate System Uniform Tax Fraudulent Misconception Collection .748 . Evolution.637 . Component 1 includes the variables. Fiscal Responsibility.515 .557 . Economic Reform.818 .743 .812 .422 .637 .615 . Tax Loss. Good Economy.636 .746 .643 .513 Extraction Method: Principal Component Analysis. Mechanism. From the table # 4.
739 Factor 4 .746 .847 Facilitate To VC .746 .636 . Component 4 includes the variables.663 Conditions . Component 8 includes the variables. Component 5 includes the variables. TIN and Filing Return. Component 6 includes the variables.689 . Educational Visit. Book Keeping and Voluntary Compliance. Facilitate To VC.702 .515 .596 Work Burden Fraudulent .761 Growth . Lack of Clarity and Penalty System. Growth and Procedures.64 Component 2 includes the variables.812 .754 .797 Penalty System . Appropriate System and Uniform Tax Component 9 includes the variables. Conditions.825 . Table # 4.761 Procedures . Work Burden and Fraudulent. Misconception.637 Factor 3 . Component 7 includes the variables.743 Lack Of Clarity Factor 7 .14(d) List of Factors Factor 1 Economic Reform convenient Mechanism Transparency Fiscal Responsibility Evolution Registration Factor 2 Tax Loss Good Economy coverage Factor 6 Factor 5 . RVAT.
586 .748 Appropriate System Uniform Tax . The variables that load highly on factor 7 seem to all relate to Tax payer Identification Number. The variables that load highly on factor 5 seem to all relate to lack of clarity and penalty system.615 From the table # 4. . Finally only one variable shows one factor.14 (c). so the researcher labels this factor misconception. It denotes these variables are inter-correlated variables. The variables that load highly on factor 6 seem to all relate to book keeping.422 . So the researcher may label this factor basic rule. Therefore the researcher may label this factor registration. The variables that load highly on factor 3 seem to all relate to growth and procedures.643 Filing Return . When the researcher done factor analysis for 30 variables. Therefore the researcher may label this factor profitability.65 Educational Visit Book Keeping Voluntary Compliance Factor 9 Misconception .14(d) the researcher identifies nine factors. it results in nine factors as shown in rotated component matrix table # 4. The seven variables that load highly on factor 1 seem to all relate to convenience. The researcher may label this factor penalty system.845 .637 Factor 8 RVAT . Therefore the researcher may label this factor compulsory requirement. The variables that load highly on factor 8 seem to all relate to appropriate system.759 . Hence the researcher may label this factor uniformity to the state. So the researcher may label this factor convenience. The variables that load highly on factor 4 seem to all relate to conditions and work burden.818 TIN . The variables that load highly on factor 2 seem to all relate to profit nature. Hence the researcher may label this factor procedure.
452 13. it is actually .257 4.15(a) The Kaiser-Meyer-Olkin (KMO) and Bartlett's test.434 2.183 17.923 55. its associated probability is less than 0.893 34.923 55.5 for a satisfactory factor analysis to proceed. Chi-Square df Sig.351 6.512 82.350 1.557 50. The KMO measures the sampling adequacy which should be greater than 0.66 4.471 15.452 13.588 1.515.664 15.547 100.495 10. In addition.863 89.121 94. This means that the correlation matrix is not an identity matrix. Bartlett's Test of Sphericity Approx.620 Rotation Sums of Squared Loadings Total 1.15(b) Total Variance Explained Extraction Sums of Squared Loadings Total 2.495 10.545 1.666 1.020 % of Cumulative Variance % 26. That is.000 The table # 4.513 45 .471 15.000 .647 1.893 8.343 .518 % of Cumulative Variance % 17.4 RESULT OF FACTOR ANALYSIS OF VAT PAYERS Table # 4.545 1.453 26. it can be seen that the Bartlett's test of sphericity is significant.245 % of Cumulative Variance % 26. Table # 4.515 275.201 26.419 65.620 74.471 41.350 1.15(a) KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy.620 Initial Eigen values Component 1 2 3 4 5 6 7 8 9 10 Total 2.201 8.880 15. .647 1.000.835 .114 97.993 3.626 .789 1.499 . the overall MSA for the set of variables included in the analysis was 0.419 65.437 65.471 41.893 16. In fact.020 . From the same table.05.889 .
. The point of interest is where the curve starts to flatten. Note also that factor 5 has an Eigen value of less than 1.15 (b). the second 15. It may be noticed that the first factor accounts for 26. It can be seen that the curve begins to flatten between factors 4 and 5. the percent of variance attributable to each factor. and the cumulative variance of the factor and the previous factors. The graph is useful for determining how many factors to retain.452%. shows all the factors extractable from the analysis along with their Eigen values. so only four factors have been retained.495% and the fourth 10.15 The scree plot is a graph of the Eigen values against all the factors. The total variance explained table # 4.647% of the variance. Scree Plot figure # 4.67 Extraction Method: Principal Component Analysis. All the remaining factors are not significant. third 13.202%.
evasion and Work burden are loaded in factor 2. Looking at the table below.642 Regulations Procedures Avoidance . Table # 4. Rotation Method: Varimax with Kaiser Normalization.15(d) List of Factors Assistance Mechanism Tax payable Growth Procedures .833 Incidence .15(c) Rotated Component Matrix Component 1 Mechanism Tax payable Growth Incidence Evasion Work Burden Procedures Avoidance Simplicity Convenient Extraction Method: Principal Component Analysis. All the remaining variables are substantially loaded on Factor 1.745 .844 .68 Table # 4.745 Simplicity . reduce the number factors on which the variables under investigation have high loadings.844 . it can be seen that simplicity and convenient are substantially loaded on Factor (Component) 4 while procedures and avoidance are substantially loaded on Factor 3.714 Evasion .716 . The factors Incidence.669 .688 .833 .820 .716 Convenient Convenience .688 2 3 4 The table # 4.642 .669 . Rotation does not actually change anything but makes the interpretation of the analysis easier.820 .714 .670 Work Burden .15 (c).670 . .
The first three variables that load highly on factor 1 seem to all relate to help VAT payers. H0: The attributes. the work burden of the respondents does not depend on the sex of such respondents.15(d) the researcher identifies 4 factors. H1: The attributes sex and work burden are dependent. sex and work burden in case of filling VAT . sex and work burden are independent i. 4. Sig.008* Value Pearson Chi-Square N of Valid Cases 11. it results in 4 factors as shown in rotated component matrix table # 4.16 Gender * Work Burden Cross tabulation Chi-Square Tests Asymp. Therefore the researcher may label this factor procedure.16: To test whether the male and female respondents differ or do not differ about the work burden in case of VAT filling. When the researcher done factor analysis for 10 variables. Since the probability value is 0. The variables that load highly on factor 4 seem to all relate to simplicity.calculated value is lesser than table value.15(c).e. It denotes these variables are inter-correlated variables.5 RESULTS OF CHI SQUARE TEST RELATING TO VAT PAYERS This section gives the results of chi-square test as applied on VAT payer responses: Table # 4. So the researcher may label this factor Assistance. The variables that load highly on factor 2 seem to all relate to work burden and incidence. Table # 4.05). The variables that load highly on factor 3 seem to all relate to procedures.954 130 df 3 (Source: Primary Data collected from VAT payers) *Significance at 5% level . there is an evidence to reject the null hypothesis and conclude that the two attributes.69 From the table # 4. Hence the researcher may label this factor regulation. (2-sided) . Therefore the researcher may label this factor convenience.008 (p<0.
Table # 4.calculated value is greater than table value. Therefore it is further concluded that work burden of the respondents depend on the sex of such respondents.18: To test whether the type of business and work burden differ or do not differ. H1: There is a significant relation between the type of business organization and work burden of respondents. Table # 4.147 130 df 12 (Source: Primary Data collected from VAT payers) *Significance at 5% level .516* Value Pearson Chi-Square N of Valid Cases 11. Table # 4.516 (p>0.17: To test whether the education and work burden differ or do not differ about the filling of VAT returns.17 Education * Work Burden Cross Tabulation Chi-Square Tests Asymp. H0: There is no significant relation between education and work burden of respondents. H1: There is a significant relation between education and work burden of respondents.70 returns is dependent. Sig. Hence there is no evidence to reject the null hypothesis and it is concluded that there is no significant relation between education and work burden of respondents.05). . As per the above chi square test results the probability value is 0. H0: There is no significant relation between type of business organization and work burden of respondents. (2-sided) .
The probability value is lesser than the table value (p<0.017 (p<0. H0: There is no significant influence of turnover on work burden of respondents H1: There is a significant influence of turnover on work burden of respondents Table # 4.187 130 Df 30 (Source: Primary Data collected from VAT payers) *Significance at 5% level .calculated value is lesser than table value. (2-sided) . there is a significant relation between the type of business organization and work burden.calculated value is lesser than table value.017* Value Pearson Chi-Square N of Valid Cases 28.71 Table # 4. (2-sided) . This shows that eleven business groups differ in their view about the work burden. it is concluded that work burden of the respondents depend on the turnover of such respondents. Sig. The chi square results show the calculated value as .854 130 df 15 (Source: Primary Data collected from VAT payers) *Significance at 5% level . Since the probability value is 0. Therefore.05). Table # 4. Sig. i.square tests Asymp.004* Value Pearson Chi-Square N of Valid Cases 54.e. .004. there is an evidence to reject the null hypothesis and conclude that there is a significant influence of turnover over work burden of respondents.19: To test whether the turnover of respondents influences or do not influence the work burden of respondents.19 Turnover * Work Burden Cross tabulation Chi-Square Tests Asymp.18 Business * Work Burden Cross tabulation Chi.05).
H0: There is no significant relation between age of business and incidence of tax.20: To test whether the turnover of respondents influence or do not influence the incidence of tax of respondents. Sig.756* Value Pearson Chi-Square N of Valid Cases 8. Table # 4. .360 130 df 12 (Source: Primary Data collected from VAT payers) *Significance at 5% level . Table # 4.calculated value is lesser than table value.72 Table # 4. The probability value of above chi square table is 0.20 Turnover * Incidence Cross tabulation Chi-Square Tests Value Pearson Chi-Square N of Valid Cases 58. (2-sided) .000* (Source: Primary Data collected from VAT payers) *Significance at 5% level . Therefore. Table # 4. H0: There is no significant difference between the turnover and incidence of tax H1: There is a significant difference between the turnover and incidence of tax. it is concluded that the incidence of tax is depending on the turnover of such respondents.226 130 df 15 Asymp. Sig. (2-sided) .000 (p<0. H1: There is a significant relation between the age of business and incidence of tax.05).21: To test whether the age of business and incidence of tax differ or do not differ.21 Age of Business * Incidence Cross tabulation Chi-Square Tests Asymp.calculated value is greater than table value. There is an evidence to reject the null hypothesis and conclude that there is significant difference between turnover and incidence of tax.
There is an evidence to reject the null hypothesis and to conclude that there is a significant relation between the respondents education and knowledge of VAT rates.calculated value is lesser than table value. (2-sided) . I. Table # 4.23: To test whether the male and female respondents differ or do not differ about the work burden in case of VAT administration. 4.416 130 df 8 (Source: Primary Data collected from VAT payers) *Significance at 5% level . H1: The attributes sex and work burden are dependent. H0: The attributes.22: To test whether the education level and knowledge of VAT rates are related or not related. H0: There is no significant relation between education level and knowledge of VAT rates of respondents. the work burden of the respondents does not depend on the sex of such respondents.026 (p<0.756 (p>0.73 As per the above chi square test results the probability value is 0.6 RESULTS OF CHI SQUARE TEST RELATING TO VAT OFFICIALS This section gives the results of chi-square test as applied for VAT officials’ responses Table # 4. there is no significant relation between the age of business and incidence of tax.05). H1: There is a significant relation between education level and knowledge of VAT rates of respondents.e. Sig. It leads to the acceptance of null hypothesis. Table # 4.026* Value Pearson Chi-Square N of Valid Cases 17.e.22 Education * Rate Knowledge Cross tabulation Chi-Square Tests Asymp.05). The chi square table probability value is 0. sex and work burden are independent I. .
24 Designation * Work Burden Cross tabulation Chi-Square Tests Asymp.563 df 4 N of Valid Cases 130 (Source: Primary Data collected from VAT Officials and consultants) *Significance at 5% level . H1: There is a significant relation between designation and work burden of respondents. Table # 4.05). The above chi square test results show the probability value is 0. Sig.24: To test whether the designation and work burden of respondents are related or not. Sig.399 (p>0.468 (p>0.25: To test whether there is any relation between age group of respondents and work burden in case in case of VAT administration. It leads to the acceptance of null hypothesis i. age groups and work burden are independent H1: The attributes age groups . there is no significant relation between the designation and work burden of respondents. It leads to the acceptance of null hypothesis i.calculated value is greater than table value. Table # 4. (2-sided) . As per the above chi square test results the probability value is 0. (2-sided) .794 130 df 16 (Source: Primary Data collected from VAT Officials and consultants) *Significance at 5% level .74 Table # 4. Table # 4. H0: There is no significant relation between designation and work burden of respondents.23 Gender * Work Burden Cross tabulation Chi-Square Tests Asymp. there is no significant difference between the gender and work burden of respondents.399* Value Pearson Chi-Square N of Valid Cases 16.e.05). H0: The attributes.468* Value Pearson Chi-Square 3.calculated value is greater than table value.e.
Sig.728 130 df 12 (Source: Primary Data collected from VAT Officials and consultants) *Significance at 5% level .912 1.25 Age Group * Work Burden Cross tabulation Chi-Square Tests Asymp.27 depicts the same. H0: There is no relation between the education and awareness of exemptions.05).258.calculated value is lesser than table value.75 Table # 4. .7 RESULTS OF ONE WAY ANOVA RELATING VAT PAYERS H0: The age of business do not influence the work burden of respondents.495 171. The probability value of above chi square table is 0.290 F 2. (2-sided) . .085* (Source: Primary Data collected from VAT payers) *Significance at 5% level The result shows that calculated F value is 2.736 162.085 (p>0. 4.000 (p<0.26 Age of Business and Work burden Sum of Squares Between Groups Within Groups Total 8. Table # 4.26 depicts the same. Since the probability value is 0. ‘F’ test was conducted and the table # 4.231 df 3 126 129 Mean Square 2.05) the null hypothesis is accepted and it is concluded that the age of business does not influence the work burden of respondents.258 Sig. there is an evidence to reject the null hypothesis and conclude that there is a significant relation between the age groups and their work burden. ‘F’ test was conducted and the table # 4.000* Value Pearson Chi-Square N of Valid Cases 74.
H0: There is no relation between the registration and incidence of tax.27 Education and Awareness of Exemptions Sum of Squares Between Groups Within Groups Total 3. . Since the probability value is 0. . Table # 4.05) the null hypothesis is rejected and it is concluded that there is significant relation between registration and incidence of tax.005 (p<0. ‘F’ test was conducted and the table # 4. .574 Sig.077 Df 3 126 129 Mean Square .28 Registration and Incidence of Tax Sum of Squares Between Groups Within Groups Total 2.061* (Source: Primary Data collected from VAT payers) *Significance at 5% level The result shows that calculated F value is 3.749 .248 20.28 depicts the same.904 139.76 Table # 4.005* (Source: Primary Data collected from VAT payers) *Significance at 5% level The result shows that calculated F value is 4.574.085 (p>0.092 F 3.534.829 23.819 143.534 Sig.165 F 4. Since the probability value is 0.904 1.05) the null hypothesis is accepted and it is concluded that there is no significant relation between education and exemptions awareness of respondents.723 df 1 128 129 Mean Square 3.
Table # 4.920 Sig.77 H0: There is no relation between the turnover and convenience to pay tax.439 2.05) the null hypothesis is rejected.717 159.000 (p<0. .060 F 9.514 171.929 1.296. There is a significant relation between turnover and convenience to pay tax. ‘F’ test was conducted and the table # 4.231 Df 4 125 129 Mean Square 2.30 depicts the same.063* (Source: Primary Data collected from VAT payers) *Significance at 5% level The result shows that calculated F value is 2.000* (Source: Primary Data collected from VAT payers) *Significance at 5% level The result shows that calculated F value is 9.063 (p>0.29 depicts the same. ‘F’ test was conducted and the table # 4.30 Age and business and Tax evasion Sum of Squares Between Groups Within Groups Total 11.05) the null hypothesis is accepted. Since the probability value is 0. .754 257.300 df 4 125 129 Mean Square 20. . Since the probability value is 0. H0: There is no relation between the age of business and tax evasion.546 339.920.296 Sig. There is no significant relation between age of business and tax evasion.29 Turnover and Convenience to pay tax Sum of Squares Between Groups Within Groups Total 81. Table # 4.276 F 2.
297 Sig. . Table # 4.05) the null hypothesis is rejected.313.743 Df 4 125 Mean Square 1.32 depicts the same.015 298. 4.05) the null hypothesis is accepted.061 (p>0.8 RESULTS OF ONE WAY ANOVA RELATING TO VAT OFFICIALS H0: There is no influence of education on work burden.31 Turnover and Tax avoidance Sum of Squares Between Groups Within Groups Total 41.827 105. Since the probability value is 0.285 339. .957 . Table # 4.297.061* 113.569 129 (Source: Primary Data collected from VAT Officials and consultants) *Significance at 5% level The result shows that calculated F value is 2.003 (p<0. ‘F’ test was conducted and the table # 4.300 Df 4 125 129 Mean Square 10. There is a significant relation between turnover and tax avoidance.313 Sig.386 F 4. ‘F’ test was conducted and the table # 4.003* (Source: Primary Data collected from VAT payers) *Significance at 5% level The result shows that calculated F value is 4.78 H0: There is no relation between the turnover and tax avoidance.846 F 2. .32 Education and Work burden Sum of Squares Between Groups Within Groups Total 7. That shows there is no significant influence of education on work burden. Since the probability value is 0.254 2.31 depicts the same.
33 depicts the same.05) the null hypothesis is accepted.038 Sig.9 RESULT OF CORRELATION Table # 4.093 (p>0. Since the probability value is 0. ‘F’ test was conducted and the table # 4. i.597 315.093* 336. Table # 4. 4.872 Df 4 125 Mean Square 5. .79 H0: There is no relation between the designation and registration.149 2.34(a) Commercial Tax Department Gross Receipts Year 2006-07 2007-08 2008-09 2009-10 VAT(Rs in crores) 2290 16473 19305 21336 TNGST 1959 (Rs in crores) 13347 329 292 272 (Source: Secondary Data collected from Tamil Nadu statistical report) .33 Designation and Registration Sum of Squares Between Groups Within Groups Total 20.038.e.527 F 2.469 129 (Source: Primary Data collected from VAT Officials and consultants) *Significance at 5% level The result shows that calculated F value is 2. there is no significant relation between designation and registration.
026 4 4 1 TNGST -.026 4 1 ` * Correlation is significant at the 0. (2-tailed) N TNGST Pearson Correlation Sig.974* .84E4 N 4 4 Std.10 RESULT OF PAIRED t-TEST Table # 4. (2-tailed) N 4 -.0821E4 1.35(b) Paired samples statistics Mean Before VAT After VAT 1. Deviation 2203.974 which is highly negative indicating that higher revenue derived from the VAT is not associated with TNGST and vice versa.05 level (2-tailed). Error Mean 1101.34(b) Correlations VAT VAT Pearson Correlation Sig. 4.84603 1350.974* .763 Std.35(a) Total Revenue of the Government Amount in Crores Total income before VAT 8499(02-03) 9767(03-04) 11421(04-05) 13597(05-06) Total income after VAT 15637(06-07) 16802(07-08) 19597(08-09) 21606(09-10) (Source: Secondary Data collected from Tamil Nadu statistical report) Ho: There is no difference in mean revenue before and after the implementation VAT H1: There is difference in mean revenue before and after implementation of VAT Table # 4. The correlation between VAT and TNGST is -0.69205 2701.882 .80 Table # 4.
(2-tailed) .01).36 shows the respondents knowledge of VAT rates. Error Mean 293.0 (Source: Primary Data collected from business firms i.36 Table showing the knowledge of VAT rates Knowledge of Rates High Moderate Low Total Frequency 44 50 36 130 Percent 33.7 100.11 COMPILATION OF OPINION OF VAT PAYERS AND OFFICIALS: VAT payers’ opinion: Table #4.000 (p<0. .8 38.35(c) Paired samples test Mean -7. Thus the implementation of VAT is effective in significantly increasing the total revenue of the Tamil Nadu Government.15596 t -25.58950E3 Std. Out of 130 respondents 44 respondents have high level knowledge about VAT rates.5 27.889 df 3 Sig. Deviation 586. 50 respondents have moderate knowledge and 36 respondents have minimum knowledge.000* *Significance at 5% level Since the probability value is 0.31192 Std. 4. the null hypothesis is rejected and it is concluded that the mean revenue derived after implementation of VAT is significantly higher than the mean revenue derived before implementation of VAT.e. VAT Payers) Table # 4.81 Table # 4.
0 (Source: Primary Data collected from business firms i.38 Table showing the awareness of proposed GST Proposed GST Yes No Total Frequency 87 43 130 Percent 66. VAT Payers) Table # 4. 67% of respondents have awareness about proposed GST. Table #4.82 Table #4.0 (Source: Primary Data collected from business firms i. It means they recommend VAT system to continue in Tamil Nadu.e.8 19.39 Assistant from VAT consultant Help of others Yes No Frequency 66 64 Percent 50.e. . 33% of respondents are not aware of GST.2 Total 130 100.9 33.2%) respondents may ask help from others like follow VAT payers etc.8 49.39 reveals that 66(50.1 100.37 reveals more than 80% of responds vote for VAT system. Only 25 respondents vote for TNGST system.e. 64 (49.2 100. VAT Payers) Table # 4.38 shows VAT payers’ awareness about proposed GST. Table #4.37 VAT or TNGST Continue in Tamil Nadu VAT System TNGST Total Frequency 105 25 130 Percent 80. VAT Payers) Table # 4.0 (Source: Primary Data collected from business firms i.8%) respondents need the help of consultants at the time of filling returns.
8 2.7% of respondents recommend continuation of TNGST and 2.2% of respondents recommend VAT system.10. 66.2 7. VAT officials’ opinion: Table #4.1 100.83 Table # 4.40 Table Showing about the Registration Registration Yes No Total Frequency 100 30 130 Percent 76.e. 23.0 (Source: Primary Data collected from business firms i.0 (Source: Primary Data collected from VAT officials and consultants) Table # 4. only 7. However they pay VAT as part of their purchase price.3 100.000.41 Table showing which system to continue in Tamil Nadu Continue in Tamil Nadu Frequency Percent VAT System TNGST Proposed GST Other System Total 86 10 31 3 130 66. They need not file separate return for VAT.9 23.3% respondents recommend other systems.7 23. VAT payers) Table # 4. .8% of respondents recommend proposed GST.40 shows 100 respondents out of 130 (77%) are registered VAT dealers and only 23% of respondents are unregistered dealers.41 shows the opinion of VAT officials of which system to continue in Tamil Nadu. 00. Unregistered dealers (URDs) are those whose annual turnover is less than Rs.
The forthcoming GST is expected to do this job as it would be rolled out only after constitutional amendment. trading rates differ from State to State. 2. i. These are all tactics for getting income from a dealer and confusing them. 3.e. It Depends upon State Government Policy. In TNGST lot of operational difficulties.84 4. New entries to be made both in system and ledger.12 This section complies the opinion given by VAT officials for the open ended questions included in the questionnaire. VAT phase is a transitional phase between General Sales Tax and Goods and Service Tax Act. What difficulties you encounter in the VAT system? i. How do you consider VAT as a better system as compared to TNGST? i. turn over tax and surcharge. . Manufacturing rates.e. Hence.e. but VAT has only one tax. Commodity codes cannot be found exactly. v. VAT Act is systematically examined and implemented. 1. Incomplete implementation. iii. If the main aim of introducing VAT is to implement uniform tax system throughout the country then why each state has its own VAT Act? i. so it is a better system as compared to TNGST. iii. VAT is more clear and has well framed rules and regulations of the products as compared to TNGST. All units of supply chain are brought under tax net and tax evasion is checked to a certain extent. iv. Own state Government Policy. ii. Input Tax Credit. iv. Sales tax comes under the State subject as per Indian constitution. It easer the burden of traders and manufactures. there is no additional tax. ii. it is difficult rather impossible to expect every State to follow a single rate structure. In TNGST work burden of officers is more when compared to VAT. Set-off tax already paid i. v. i.
The Government of India raises the tax rates by slabs. In VAT state Government has a lot of income but in CST central income. Needs to be simplified more. iii. Suggest a single uniform tax system in all the states. How do you compare the present VAT with the proposed GST? i. Presently VAT follows different set of rules and regulation in the Indian Union. Undecided 5.85 ii. Give general suggestions in the context of VAT? i. vi. inter-state purchase set-off should be made available. Needs to be fully computerized. . v. More exemptions. But better to remove the tax slabs. GST system is the best one. Then only India will grow. No idea about this topic. Commodity code is needed. v. iv. ii. v. iv. iii. vii. ii. Inadequate man power. iii. If exemptions are withdrawn VAT system would give more revenue to Government. After the GST implementation the rate of levy of tax would increase. 4. The main difficulties of VAT system in practices and lack of implementation of technical progress. Equal treatment and equality for all. iv. e – Mode is not working 100%.
16 Commercial Tax Department Gross Receipts 25000 Revenue in Crors 20000 15000 10000 VAT 5000 0 TNGST Year The Table and Bar Diagram show the clear picture about the revenue growth of the state after implementation of VAT. On the other hand VAT was introduced in 2006-07 financial year. In the next financial year itself (2007-08) it collected Rs.42 Commercial Tax Department Gross Receipts (Amount in Crores) Year VAT 01-02 02-03 8499 03-04 9767 04-05 11421 05-06 13597 06-07 2290 13347 07-08 16473 329 08-09 19305 292 09-10 21335 271 TNGST 7541 (Source: Secondary Data collected from Tamil Nadu statistical report) The above data are presented diagrammatically in Fig # 4.86 4.13 REVENUE COLLECTION UNDER VAT Table # 4. From that one may conclude that after introducing the VAT the revenue of the state would grow every financial year. The VAT has come in to force in Tamil Nadu in the year of 200607. .13597 crores in the year of 2005-06. VAT is most preferable to the State compared to TNGST. If one compares the revenue growth of TNGST and VAT.16473 crores. Because from 2001-02 financial year to 2005-06 financial years TNGST’s highest collection was Rs.
00 7. .17 represent the revenue growth of Tamil Nadu Government.93 19. The total revenue of the Government has consistently increased.45 16.92 16.988 Table # 4.05 15.70 14. Hence the implementation of VAT does not affect the total revenue of the State Government.63 8499 9767 11421 13597 15637 16802 19597 2009 10.25 (Source: Secondary Data collected from Tamil Nadu statistical report) 21606 The above data are presented diagrammatically in Fig # 4.x + 4843 R² = 0.43 Commercial Tax Department Total Receipts (Amount in Crores) Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 VAT 2290 16473 19305 21335 TNGST 7541 8499 9767 11421 13597 13347 329 292 271 Total 7541 Variance 958 1268 1654 2176 2040 1165 2795 Growth Rate (Y-O-Y) 12.87 Table # 4.17 TOTAL 25000 20000 15000 10000 5000 0 TOTAL Linear (TOTAL) y = 1797.43 and Figure # 4.
During the British rule. The concept of VAT was first adopted by France in 1954. The design of Tamil Nadu state VAT is generally guided by the best international practices with regard to legal frame work. primarily that of double taxation. By 2000. Following the Madhya Pradesh “petrol tax”. Another key factor in preparation of the design of state level VAT is the national consensus on certain issues. Madras Presidency introduced “Sales Tax” in 1939. Tamil Nadu is one of the 21 states in india which have introduced the Value Added Tax (VAT) system of taxation from 1 st April 2007. . VAT has other advantages for both business and government. FINIDINGS AND CONCLUSIONS Summary of the Study A tax is “a back bone of every country to meet their social obligations. VAT replaced the single point tax which had a number of disadvantages. With introduction of VAT. It eliminates cascading impact of double taxation and promotes economic efficiency. Government is the only person to levy tax. it was used by Canada and 40 other industrialized countries. The consensus has been arrived at through the discussion in the empowerment committee of state finance ministers on implementation of state level VAT. the sales tax department has moved to a globally recognized sales taxation system that has been adopted by more than 130 countries. as well as operating procedures.88 CHAPTER V SUMMARY. VAT is a modern and progressive taxation system which avoids double taxation. On 1st April 2007. In the addition to offering the possibility of a set-off tax paid on purchases. self-assessment system with more trust put on dealers. Without tax the Government cannot do any social benefit activities. It is primarily a self-policing. Hence tax is compulsory payment or contribution by the people to the government for which there is no direct return to the tax payers. arrack and toddy shops were functioning in Madras Presidency. Sales Tax began in India with “petrol tax” introduced by the government of Madhya Pradesh.
Objectives of the Study To study about value added tax system in general. It widens the. It has an improved control. VAT is levied on sale of goods including intangible goods. To examine the influence of various factors on VAT compliance by VAT payers. It is invoice based. To study the profile of VAT payers and VAT administrators. mechanism resulting in better compliance. The total population of the study consists 260 respondents. which include 130 VAT officials and VAT consultants/and 130 VAT payers. To examine whether value added tax system helps to revenue appreciation to the government compare to other tax system like TNGST and finally To find whether VAT system is convenient to the government as well as the VAT payers Methodology In the present study both primary and secondary data were used with the help of questionnaire from the respondents. The statistical tools used for the purpose of analysis of data were Chi-square test. supported by the Tamil Nadu Value Added Tax Rules (TNVAT Rules). VAT in Tamil Nadu is levied under a legislation known as the Tamil Nadu Value Added Tax Act (TNVAT Act). and as a result it offers a better financial system with less scope of error. Convenience cum Judgment sampling techniques were adopted in this research. correlation. One Way ANOVA. The study has been conducted in a period of six months from December 2010 to May 2011. . To examine the influence of various factors on the work burden VAT officials. tax base and promotes equity. Paired t-Test and Factor Analysis.89 It provides the potential for a stronger manufacturing base and more competitive export pricing.
7% respondents have completed 12th standard. Age group about VAT officials tells 29% of respondents are between 50-59 years old. 30 respondents turnover is from Rs. VAT Officials: (Sample Size is 130) Out of the 130 respondents 53. 41 respondents are tax consultants. 37. 28 respondents) are 30-39. 111 out of 130.9%) respondents are 20-29 years. 36 respondents are 40-49 years and only 19 are tn the age group of 20-29 years. 16 respondents 10-15 years.57 respondents.5% (i. 29 are post graduates and 6 are professional degree holders. 42 respondents out of 130 are Assistant Commercial Tax Officers. only 3 respondents out of 130 are doing business for more than 20 years. The majority respondents are married i.e.3% are unmarried. 53 respondents are doing business 0-5 years. The respondents are engaged in different business like Provisional store. 83. Majority respondents are graduate i. .10 to 20 lakhs.7% respondents are married and 42.40-50 lakhs. Hardware. 37 respondents are 30-39 years. 57.70 respondents and 60 respondents are female.1%) of respondents are male and 22 respondents are female.8% of respondents are male i. Qualification wise majority respondents are graduates i.e. and 12 respondents are post graduates. and 23 respondents are 40-49 years old. 60 out of 130 respondents’ turnover is Rs. 19 respondents 15-20 years.e. 21.e.e.e. More than 50% (i.e. etc. 56.62. 39 respondents 5-10 years. 100 respondents out of 130 are registered VAT dealers. and 16 respondents’ turnover Rs. Pharmacy shop.1-10 lakhs. 21 are Assistant Commissioners.90 The major findings of the study are as follows VAT payers: (sample size is 130) Among the 130 respondents more than 80% (i. and 17 respondents are Commercial Tax Officers.
There is a relation between age and work burden of VAT officials. Findings of ANOVA The age of business does not influence the work burden of VAT payers. There is a relationship between turnover and tax avoidance. There is a significant Registration and Incidence of tax of VAT payers. The factor analysis for VAT payers resulted in of 4 factors out of 10 variables. .e. There is no significant difference between the designation and work burden of VAT officials. There is no relation between education and work burden VAT payers. There is a significant relation between turnover and work burden of VAT payers. It denotes the designation and work burden of respondents are independent. 9 factors. The gender and work burden of VAT officials are independent. There is no significant relation between the age of business and incidence of tax. Work burden VAT payers are related to type of business. There is significant relation between turnover and incidence of tax. Findings of Chi-square Test The work burden of the VAT payers is dependent the gender. There is no significant relation between Education and Exemptions awareness of VAT payers. Findings of factor Analysis The factor analysis for VAT officials resulted in clubbing of 30 variables into 9 components i. There is a relationship between Turnover and Convenient to pay tax There is no difference between the Age of business and Tax evasion of VAT payers.91 Income wise 93% of respondents earn 1-4 lakhs per annum and only 9 respondents out of 130 earns 4-8 lakhs per annum. There is a significant relation between the respondents’ education and knowledge of VAT rates. It shows both attributes are independent.
92 There are no variations of vat officials education and their work burden of VAT officials. Because of Own state Government Policy. 33% of respondents are not aware of GST. VAT payers 44 respondents have high level knowledge about VAT rates. 23. Manufacturing rates. 80% of responds vote for VAT system and 25 respondents vote for TNGST system. Compilation of opinion/suggestions of respondents I. Findings of Paired t-Test On based a paired t-Test finds the implement of VAT is derived revenue is significantly very more.2%) respondents may ask help from others. . Findings of Correlation There was a highly negative correlation indicating that higher the revenue derived from the VAT is not associated with TNGST. VAT officials 66. 66 respondents need the help of consultants at the time of filling returns.3% respondents recommend other systems.7% of respondents recommend continuation of TNGST and 2. trading rates differ from State to State.8% of respondents recommend proposed GST. These are all tactics for getting income from a dealer and confusing them. 50 respondents have moderate knowledge and 36 respondents have minimum knowledge. 67% of respondents have awareness about proposed GST.2% of respondents recommend VAT system. II. 64 (49. only 7. Each state has its own VAT Act.
i. General suggestion for VAT. Needs to be fully computerized. there is no additional tax. In TNGST work burden of officers is more when compared to VAT. but VAT has only one tax. But better to remove the tax slabs. Commodity codes cannot be found exactly. Difficulty in implementation. e – Mode is not working 100%. Then only India will grow.e. Commodity code is needed. Difficulties of VAT system. .93 VAT is a better system compared to TNGST because of: In TNGST lot of operational difficulties.e. The Government of India raises the tax rates by slabs. VAT is clear and has well framed rules and regulations of the products as compared to TNGST. turn over tax and surcharge. More exemptions. If exemptions are withdrawn VAT system would give more revenue to Government. Presently VAT follows different set of rules and regulation in the Indian Union. New entries to be made both in system and ledger. Suggest a single uniform tax system in all the states. i. Inadequate man power.
It happens because of lack of sufficient knowledge.5% to 1%. It must be in local language. So the authorities of the Commercial Tax Department should fill the vacancies in Commercial Tax Offices immediately.5%.12. This will overcome the limitation in future. Finally it is concluded VAT helps to have more revenue collection to the Government of Tamil Nadu. VAT officials also feel heavy work burden to administer the VAT. Definitely it would help to further increase the revenue. for that they need the assistance of VAT consultants. the State Government should issue suitable manual of VAT to the assesses. For that. From 11th July 2011onwords the government of Tamil Nadu has increased the VAT rates from 1%. VAT payers feel heavy work burden in case of filing of VAT return. because of inadequate staff members. which should contain the practical application of VAT procedures. Suggestions are made based on the respondent’s opinion.4%. So the government should take utmost care in the matter of issuing manual and recruitment of staff members. .94 Conclusion and Suggestions The suggestions and conclusion are based upon the results of the study.14.5%. It reavels one of the drawbacks of VAT. So the authorities should concentrate on recruitment of staff members.
Worldwide Versus Territorial Tax Systems: Comparison of Value Added Tax and Income Tax (Wayne State University Law School Legal Studies Research Paper Series No.Sitaraman & Co Private Ltd. New Delhi-02. 09-27 December 8. Auditing And Transactions Matching (Social Science Research Network. Kothari .R “Research Methodology (Methods and Techniques)”. Balachandran. Value Added Tax Evasion. Arindam Das Gupta and Ira N. New Delhi-110 044. Response Book. 2005. 10th Edition.C. c. European Vat – General Principles (Social Science Research Network 2007). .V “Indirect Taxation”. the Empowered Committee of State Finance Ministers. New Age International Ltd. 2010. chang woon nam & Rudiger parsche. First Discussion Paper on Goods and Service Tax in India. Andrea gebauer. Business Books from SAGE Publications Ltd. Srikanth Venkatesan (Advocate) “Understanding Tamil Nadu Value Added Tax (Covering Case Laws of the Madras High Court and Supreme Court)”.Gaur and Sanjaya S. Journals and Articles Alan Schenk. Wiley Eastern Ltd. Gang. March 2007). Chennai-14. 1996). New Delhi-110 002. New Delhi. Can Reform Models of Value Added Taxation stop the VAT Evasion and Revenue Shortfalls in the EU? (Journal of Economic Policy Reform Vol.95 BIBLIOGRAPHY Books and Hand Materials A guide on value added tax by The Coimbatore district small industries association (CODSSIA) Ajai S. 2009). Arvind Ashta.Gaur “Statistical Methods For Practice and Research (A Guide to Data Analysis using SPSS)”. Tamil Nadu Statistical Report of Commercial Tax Department. Law Book Publisher. Second Edition. 1994. Sultan Chand Publications. 10.
Marna Kearney. Michael Keen and Jack Mintz: The Optimal Threshold for a Value Added Tax (Journal of Public Economics.P. Value Added Tax versus Social Security Contribution Research Network . 2009 page No 83-114). Neil.2007). Helena Blazic and Mira Dimitric. 2007). 2010). Christian Hubert Ebeke. Jenkins et al. 2005). Glenn P. Rao. The Macroeconomic Impact of the IMF Recommended VAT Policy for the FIJI Economy: evidence from a CGE model (Blackwell Publishing Ltd. Bahro. Berhan. 11 pages). Lyubomir P. K. Is the Value Added Tax Naturally Progressive? (Social Science Research Network 2006). The Value-Added Tax: Its Causes and Consequences ( International Monetary Fund . Value Added Tax And Sales Tax (Comparative Overview) (Social Science Research Network. Lumumba Omweri Martin et al. The High Costs Controlling CST and VAT Evasion (Canadian Tax Journal. VAT: The Elixir for America’s economic Ills? (Journal of Finance and Accountancy. 1 (2010). Paresh Kumar Narayan. p993-1011. 53 Issue 3. Tax Reforms in India: Achievements and Challenges Ahead (Journal of Asian Economics. Graham Harrison and Russell Krelove. Dr. Rao.A and Jenkins. The Effectiveness of Electronic Tax Registers in Processing of Value Added Tax Returns (African Journal of Business & Management -AJBUMA Vol. 16 Issue 6. Remittances. Vol. 19p). VAT Refunds: A Review of Country Experience(International Monetary Fund. 2003). An Analysis Of South Africa’s Value Added Tax (World Bank Policy Research Working Paper 3671. Sherman Robinson and Karen Thierfelder. p720-736. The Reduced VAT Rate for Small Business in Croatia (Original scientific paper. Zabov.Aug 1999). August 2005). Govinda. Laszlo Goerke. Shankaraiah and D. Value Added Tax Accounting: Concepts And Issues (Social Science Research Network. Vol. Dec2005. 17p). Glenn. 2005.96 Benjamin A. (Social Science . 2009). Value Added Tax And Tax Revenue In Developing Countries (2010). 2004).N. Michael Keen and Ben Lockwood. M.
Renata Dombrovski and Sabina Hodzic.emathzone. Kalpna Agarwal And Gunjan.in www.tnvat.tax4india. Rege. 2010). Roberto Steiner and Carolina Soto. p493-504).97 Rawat Deepa Agarwal.edu.indiamart. A General Equilibrium Analysis Of Vat In India (Blackwell Publishing Ltd.tn.com .9.uq. Sameer R. Impact Of Value Added Tax On Tourism (International business and economic research journal. 1994).gov. 24 Issue 2. vol. Tax Evasion and Elusion of Value Added Tax in Colombia (Social Science Research Network.gov. Vol.com www.com www. Jun2010.in www.google. Macroeconomic Effects of VAT in India (Finance India. Web Sites Used: www.com www. 2000).au www.
29 Years d) 40 . .HARIKUMAR an M. I am doing research in the area of “value added tax with special reference to Thiruvallur Region”. Marital status a) single b) Married b) 20 .39 Years e) 50 . Pondicherry University. Kindly put a tick for the right options and give your opinion. Gender a) Male b) Female 3. Age Group a) 19 Years or Younger c) 30 . puducherry.49 Years f)above60 Years 5. I request you to solicit the required information for research purpose. The opinion given would be treated as highly confidential and will be used only for academic purpose.Phil scholar in commerce..59 Years 4. Name: ……………………………………………………………………………… 2. Educational qualification a) Upto12th standard c) Post Graduate e) Others b) Graduate d) Professional degree please specify……………………………………………. 1.98 QUESTIONNAIRE ANNEXURE-I “A QUESTIONNAIRE FOR VAT PAYERS” Dear Sir/ Madam I am A.
99 6. Whether you are a registered VAT dealer? a) Yes b) No . How old your business is? a) 0-5 years c) 10-15 years b) 5-10 years d) 15-20 years please specify……………………………. d) More than 20 years 9. Which type of business are you doing? a) Pharmacy shop b) Provisional store d)Fancy store c) Electrical or Electronics shop e) General merchant g) Foot wear shop i) Automobile shop k) Others f) Textile h) jewellery shop j) Hardware Please mention……………………………………… 7. 8. Annual turn over a) 1 to 10Lakhs d) 30 to 40Lakhs g) 60 to 70Lakhs j) 90 to 1 crore b) 10 to 20Lakhs e) 40 to 50Lakhs h) 70 to 80Lakhs k) Above 1 crore c) 20 to 30Lakhs f) 50 to 60Lakhs i) 80 to 90Lakhs Please specify how much? ……………………………………….
5-strongly agree 10. The Value added tax system actually leads to a simpler tax system. In Tamil Nadu state Value added tax system helps to most dealers’ growth? a) 1 b) 2 c) 3 d) 4 e) 5 12. The assessment procedures under VAT are very simple and clear. a) 1 b) 2 c) 3 d) 4 e) 5 14. 3-undecided. In Value Added Tax system there is some chance of tax evasion? a) 1 b) 2 c) 3 d) 4 e) 5 17. Value added tax system is an alternative mechanism of collection of tax? a) 1 b) 2 c) 3 d) 4 e) 5 19. Incidence of tax is more under value added tax system as compared to other systems like TNGST system. a) 1 b) 2 c) 3 d) 4 e) 5 20. In Value Added Tax system there is some chance of tax avoidance? a) 1 b) 2 c) 3 d) 4 e) 5 18. The computation of amount of tax payable is simple under VAT as compared to other systems. 4-agree. a) 1 b) 2 c) 3 d) 4 e) 5 16. 2-disagree. a) 1 b) 2 c) 3 d) 4 e) 5 13. in case of filing of VAT return? a) 1 b) 2 c) 3 d) 4 e) 5 11. Value added tax system has less work burden. Are you aware of exemptions available under Value Added Tax system? a) Yes b) No . “It is easy and convenient to pay tax under VAT” a) 1 b) 2 c) 3 d) 4 e) 5 15.100 1-strongly disagree.
What about your knowledge about Value added tax system in the matter of tax rates. 22.101 21. In your business. a) High b) Moderate c) Low 23. Under which type you are paying VAT? a) MANVAT b) Whole sale VAT c) Retail VAT 24. Are you aware of incentives available to dealer under VAT? a) Yes b) No If yes what type of incentives are availed of? Please mention a) …………………………………………………… b) ………………………………………………… c) …………………………………………………… d) ……………………………………………………. Are you taking the help if tax consultants for filing tax VAT returns? a) Yes b) No . mention the goods you are dealing which are exempted? a) …………………………………………………… b) ……………………………………………………. Are you aware of the proposed GST system? a) Yes b) No If yes would you like recommend for the adoption of GST system a) Yes b) No 26. c) …………………………………………………… d) ……………………………………………………. Which tax system would you recommend to continue in Tamil Nadu? a) Value added tax system b) TNGST 25. 27.
Marital status b) 20 ....39 Years e) 50 .49 Years f)above60 Years .. Kindly put a tick for the right options and give your opinion..59 Years 4.. Gender a) Male b) Female 3. ANNEXURE-II “A QUESTIONNAIRE FOR VAT CONSULTANTS AND OFFICIALS” Dear Sir/ Madam.29 Years d) 40 .. Age Group a) 19 Years or Younger c) 30 ...... Name: ……………………………………………………………………………… 2........... Pondicherry University........Phil scholar in commerce.. I request you to solicit the required information for research purpose....... 1.. The opinion given would be treated as highly confidential and will be used only for academic purpose.HARIKUMAR an M. I am A.. puducherry.102 If yes how much fees are you paying the. I am doing research in the area of “value added tax with special reference to Thiruvallur Region”.......
Annual income a) 1 to 4Lakhs c) 8 to 10Lakhs b) 4 to 8Lakhs d) 10Lakhs above . 6. Educational qualification a) upto12th standard c) Post Graduate e) Others b)Graduate d) Professionals please specify……………………………………………. Employment designation / Position currently held a) Professional cadre c)Deputy commissioner e) Commercial tax officer f) Assistant commercial tax officer g) Tax analyst/consultant b) Joint commissioner d)Assistant commissioner 7.103 a) single b) Married 5.
a) 1 b) 2 c) 3 d) 4 e) 5 13. 4-agree. Value Added Tax system has lot of conditions imposed in registration. Value added tax system is expected to prevent tax loss to the state. In Tamil Nadu state Value added tax system helps to most dealers’ growth? a) 1 b) 2 c) 3 d) 4 e) 5 11. VAT payer feels “it is easy and too convenient to pay” a) 1 b) 2 c) 3 d) 4 e) 5 14. 3-undecided. a) 1 b) 2 c) 3 d) 4 e) 5 15. Registration of all taxable persons is must for successful implementation of tax. Implementation of VAT reduces tax avoidance and Evasion. The Value added tax reforms are good for the economy of Tamil Nadu. a) 1 b) 2 c) 3 d) 4 e) 5 16. 5-strongly agree 8.104 1-strongly disagree. a) 1 b) 2 c) 3 d) 4 e) 5 12. 2-disagree. Value added tax system has less work burden? a) 1 b) 2 c) 3 d) 4 e) 5 10. a) 1 b) 2 c) 3 d) 4 e) 5 9. a) 1 b) 2 c) 3 d) 4 e) 5 . The Value added tax system actually leads to a transparent tax system.
a) 1 b) 2 c) 3 d) 4 e) 5 22. 4-agree. Value Added Tax system provides revenue security to the government. Value added tax system ensures that a tax payer does not involve in fraudulent activities. The Value Added Tax system shows a complete and true appreciation of fiscal responsibility.e. a) 1 b) 2 c) 3 d) 4 e) 5 19. 2-disagree. 3-undecided. coverage) a) 1 b) 2 c) 3 d) 4 e) 5 20. a) 1 b) 2 c) 3 d) 4 e) 5 18. 5-strongly agree 17. Value added tax system is an alternative mechanism of collection of tax? a) 1 b) 2 c) 3 d) 4 e) 5 . (I. The recent evolution of VAT can be considered as the most important fiscal innovation. a) 1 b) 2 c) 3 d) 4 e) 5 24. a) 1 b) 2 c) 3 d) 4 e) 5 21. a) 1 b) 2 c) 3 d) 4 e) 5 23. Tax reforms in India have been initiated as a part of the economic reforms in 1991. There is a general belief that revenue collection under VAT is more than that under TNGST. VAT covers all type of goods and services and experts say it is one of the important advantages. a) 1 b) 2 c) 3 d) 4 e) 5 25. The Value added tax procedures are very simple and clear.105 1-strongly disagree.
Retail VAT(R-VAT) is difficult to administer compared to MANVAT and W-VAT? a) 1 b) 2 c) 3 d) 4 e) 5 35. Value added tax system has appropriate tax structure and simple procedures and forms to facilitate. The main aim of the government in introducing Value Added Tax system is to implement the uniform tax system throughout the country.106 1-strongly disagree. Value Added Tax system suffers from lack of clarity on the treatment of interstate sales. 4-agree. 5-strongly agree 26. An appropriate system for registration and tax payer identification is required for administrating of VAT. a) 1 b) 2 c) 3 d) 4 e) 5 31. a) 1 b) 2 c) 3 d) 4 e) 5 32. Is VAT promotes voluntary tax compliance. encourage and induce the dealer for voluntary compliance. a) 1 b) 2 c) 3 d) 4 e) 5 . Value added system has a sound and effectively enforceable penalty system that stimulate dealers to go for voluntary compliance. 2-disagree. a) 1 b) 2 c) 3 d) 4 e) 5 30. a) 1 b) 2 c) 3 d) 4 e) 5 27. In TNVAT the filing of chartered accountant report and opting for self assessment is not mandatory. Tax payer Identification Number (TIN) is must to identify the dealers. a) 1 b) 2 c) 3 d) 4 e) 5 33. 3-undecided. a) 1 b) 2 c) 3 d) 4 e) 5 29. Large number of small scale businesses are under misconception that input tax has to be adjusted against output tax? a) 1 b) 2 c) 3 d) 4 e) 5 34. a) 1 b) 2 c) 3 d) 4 e) 5 28.
may not be taxed under VAT? Because. a) It is difficult to administer b) It is based upon their price fluctuations c) It is not considered goods under VAT act d) None of the above If you choose none of the above option please indicate the correct reason for that ……………………………………………………………………………………… ………………………………………. etc. petroleum products. Whether incidence of tax avoidance and evasion has reduced considerable under VAT in comparison with TNGST? a) Yes b) No 41. Certain goods like lottery.107 36. Which tax system would you recommend to continue in Tamil Nadu? a) Value added tax system b) TNGST c) Proposed GST d) Other system (please mention …………………………………………………………………………………………………………) 40.. Dealers are highly satisfied at the time of your educational visit? a) 1 b) 2 c) 3 d) 4 e) 5 37. Suitable system of invoicing and bookkeeping is required? a) 1 b) 2 c) 3 d) 4 e) 5 38. If the main aim of introducing VAT is to implement uniform tax system throughout the country then why each state has its own VAT Act? . 39.
Give the general suggestion in the context of VAT? . How do you compare the present VAT with the proposed GST? 45.108 42. What difficulties you encounter in the VAT system? 44. How do you consider VAT as a better system as compared to TNGST? 43.