Value Added Tax
UNIVERSITI TEKNOLOGI MALAYSIA
FACULTY OF MANAGEMENT
Financial Management
Value Added Tax; Goods and Service Tax
ABDOLMABOOD FOOLADIVANDA | MH101017 |
Prepared for
Prof. Dr. Melati bt Ahmad Anuar
April, 2011
1. Introduction
VAT is a system in which the tax is collected on the value added to the goods at each stage of sales. The dealer selling the goods collects tax on the full price at which he sells the goods. At the end of a tax period he reduces from the tax so collected by him, the tax which has been charged to by the dealers from whom he purchased goods during the tax period and deposits the balance to the Government treasury. In other words the "value added" to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and given to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products.
2. Advantages of VAT
* It is simple * The burden of taxation is shared. * Fewer tax slabs * Simpler procedures * Less discretion to the officials * More transparent * Well Defined Refund Procedure in place * Refund on application, in case ITC (International Trade Comission) exceeds tax liability.
3. Who are liable to pay tax under VAT?
* Taxable person: Liable to pay VAT as per schedule. * Registered Person: Liable to pay lump-sum on his taxable Turnover at the specified rate. * Casual Trader: Liable to pay VAT as per schedule.
4.1. B-Registration All persons except casual traders who are liable to pay tax under VAT are required to get registered. Therefore, there are two types of mutually exclusive forms of registration under VAT:
VAT
FACULTY OF MANAGEMENT
Financial Management
Value Added Tax; Goods and Service Tax
ABDOLMABOOD FOOLADIVANDA | MH101017 |
Prepared for
Prof. Dr. Melati bt Ahmad Anuar
April, 2011
1. Introduction
VAT is a system in which the tax is collected on the value added to the goods at each stage of sales. The dealer selling the goods collects tax on the full price at which he sells the goods. At the end of a tax period he reduces from the tax so collected by him, the tax which has been charged to by the dealers from whom he purchased goods during the tax period and deposits the balance to the Government treasury. In other words the "value added" to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and given to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products.
2. Advantages of VAT
* It is simple * The burden of taxation is shared. * Fewer tax slabs * Simpler procedures * Less discretion to the officials * More transparent * Well Defined Refund Procedure in place * Refund on application, in case ITC (International Trade Comission) exceeds tax liability.
3. Who are liable to pay tax under VAT?
* Taxable person: Liable to pay VAT as per schedule. * Registered Person: Liable to pay lump-sum on his taxable Turnover at the specified rate. * Casual Trader: Liable to pay VAT as per schedule.
4.1. B-Registration All persons except casual traders who are liable to pay tax under VAT are required to get registered. Therefore, there are two types of mutually exclusive forms of registration under VAT:
VAT