VAT Calculator
VAT is considered as an important tax reform-initiated post liberalization of the economy of India. VAT became a part of Indian Taxation system from April 1, 2005. In India, State level taxation replaced general sales tax structure. It is a system where taxes on goods levied at a single point which had resulted in cascading effect on commodities. To calculate the net amount, we make use of the VAT Calculator.
Understanding the concept of Value Added Tax (VAT)
- It is a State level Indirect Tax imposed on the sale of goods and services when these goods are ultimately sold to the consumer.
- It is an important component of the GDP (Gross Domestic Product of the country).
- Value-added tax (VAT) is implemented in all States and Union territories of India except for Andaman and Nicobar Islands and Lakshadweep Island.
Benefits of Value Added Tax
- To eliminate the line of tax evasion.
- To evade undervaluation at all phases of production and distribution.
- Uplifting of the existing system and create a well-regulated system.
- Help the nation to harmonize better in the WTO regime.
- Result in better tax compliance by generating a series of invoices that helps in doing fruitful audit.
- Keep away with cascading tax burden.
- To discourage the detrimental tax rate war and trade deviation among the states.
Working of VAT
- Value -Added Tax is a multi-taxation process with the tax imposed on ‘Value addition’ at each phase of the production/ distribution chain.
- Collection of Value-added Tax takes place at different stages of sale with the provision to set off for tax paid on inputs i.e. tax paid at the preceding stages.
- The focus is to reduce the tax burden by ensuring only the ‘additional value’ is taxable. This will ultimately reduce the possible cost for the consumer.
VAT rates
VAT is a state- level subject, rate of VAT differs from state to state depending upon the VAT rules and guidelines of the state
Below is the broad classification of rate slab for various goods and services:
- 0% (exempted) VAT rate– Goods that are of social importance, natural form and are mostly sold by the unorganized sector such as unprocessed agricultural goods.
- 1% VAT rate – For precious and semiprecious metals such as gold, silver, pearls, etc.
- 4-6% VAT rate – Essential items, daily consumer goods, inputs used for manufacturing and declared goods are categorized under this slab by most of the state governments.
- 20% VAT rate – for luxury goods.
- The rest of the commodities will be taxed at a Revenue Neutral Rate of 14.5%.
VAT schedule for some of the big states of India
Andhra Pradesh, Telangana
Schedule I
| List of goods exempted from tax under Section 7
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Schedule II
| Zero-rated transactions eligible for input tax credit
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| Schedule III | List of goods taxable @1%
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| Schedule IV | List of goods taxable@5%
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| Schedule V | Goods taxable at standard rate (RNR) of 14.5%
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| Schedule VI | Goods subjected to tax special rates.
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Gujarat
Tax-free commodities are categorized under schedule I goods
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Sale and purchase of commodities or goods that are taxed at 5% are classified under schedule II
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Special rate of value-added tax applies to goods categorized under schedule III
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Commodities or goods that are not classified under any of the above schedule comes under the general category and are taxed at 15%
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Maharashtra
As per Schedule A essential/necessary commodities such as food stuffs, drugs etc are taxed at 0% (exempted or tax free)
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Precious metals and stones such as gold, pearl, silver etc. are categorized under schedule B which are taxed at 1.2%
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Goods that are of special importance and notified goods which comes under schedule C are taxed at 6%
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Liquors, fuel etc. are categorized as schedule D goods which are taxable at 20% and above
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All the other commodities and goods that are not specified in the schedules are classified as schedule E goods and are taxed at 13.5%
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