Value Added Tax

Value Added Tax is the tax applied to the products and services of the supply chain. However, when the value is applied to the products at the time of production and the sale, then the customers or consumers give the tax of the products. The Value of Tax of the products that the customers give depends on the cost or price of the products. The Value Added Tax is the difference between any cost of the products at the sale and the previous cost given in the initial stage. Many industries have value Added taxes, but the United States has no value-added tax.    

Value Added Tax

Value Added Tax is applicable to all the products and services that are sold. The customers and consumers pay the Value Added Tax for all the products and services they buy, and this tax depends upon the value of the products. The values or prices of the products are different, so the taxes are also different. Value-Added Taxes are measured in percentage so which products have more value or price then the customer has to pay more tax of the products. Value Added Tax introduced in India on 1st April 2005. Value Added Tax is the expenditure tax that is applied to the products at any time of the supply chain.        

Value Added Tax Meaning

Value Added Tax is a tax that the central Government controls, and this tax is applied to the goods and services that are sold to the consumers and customers. The minimum rate of the VAT is 12% to 15%, and it also reduces 5%. Value Added Tax is the internal and important part of GDP. This VAT is the indirect payment from the buyers to the Government for any kind of commodities and services. The Value Added Tax is applicable at any time of the supply chain from the production time of the goods or products to the sale time. However, if a businessman earned Rs. 5 lakhs per Anum, then he or she is registered to the VAT. Value Added Tax is applicable to the local goods as well as the imported goods. Many things in India have zero VAT. Some of the products have 1% VAT, and some of the products like tea and medicines have 4-5% VAT. Some of the products have 12% to 15% tax, and those are mainly luxury products.   

What is Value Added Tax?

Value Added Tax is the consumption tax that is reliable for selling products and services. VAT is calculated like “VAT= Output Tax – Input Tax”. The buyers or consumers are paid the tax to the Government for any goods and services. Example of VAT- if Ratan has a cafe and he buys things of Rs. 20000. He gives 10% tax to the Government for the things or products. Then 10% of 20000 is 2000. After selling the food in the cafe, he earns 100000 Rs. and the output tax is supposed to be 10%, and it became 10000. Therefore, the VAT is= 10000-2000= 8000 Rs.  

Importance of Value Added Tax  

Value Added Tax is the major source of income for every Indian state and most of the union territories. VAT was introduced to India on 1st April 2005. VAT increases the trade, and if the tax is removed, the consumers or customers will not pay the extra value of the products and services. India was the last few countries that introduced Value Added Tax as a tax. Taxation of India saw loopholes in the taxpayers. Many businessmen and enterprises avoid tax and do not pay it on time. VAT was introduced to reduce these loopholes and make it transparent to the taxation process. VAT has multiple layers on products and services from production time to sale time. Value Added Tax differs from one state to another state. 

Difficulties in implementing Value Added Tax

Almost three-fourth part of India has taken VAT administrations. They leave the old stage of tax that has existed for 50 years. The Value Added Tax is a very complicated tax that needs to be rechecked by honest and appropriate machines of Government. It needs to link the various industries and productions that give tax. India faced a disadvantage as Value Added Tax is counter revolutionary in nature. VAT gives problems to poor people rather than rich people. VAT was introduced in India for replacing the “general sales tax”.         

Effects of Value Added Tax on Consumers

Value Added Tax gives an extra burden to poor consumers rather than the rich ones. The consumer pays the tax to the Government for any products and services that are for selling. When the consumers buy these commodities for daily life, they have to pay taxes for those products. The Value Added Tax is mainly a negative impact on the people of this society, but it is very much beneficial for the Government for economic growth.    

Conclusion

This study or discussion is all about the Value Added Tax applied to the products and services sold. This VAT is applied to the products and services at any time of the supply chain. It applies the value from the production time to the sale time of the products and services. The country introduced VAT for reducing the loopholes of businessmen and enterprises. VAT helps the country to increase economic growth, and VAT is a major source of income. However, VAT affects poor people and gives them a burden.