12 November 2013
Input tax means when a company buys goods or services from another supplier, VAT is charged on the purchase price that is known as input tax. Out put tax means when the company sells its own goods or services it charges its customers VAT this is output tax.
The difference between output tax and input tax is payable to Customs and Excise department. If input tax is greater than output tax the company can claim back money from Customs and Excise department.
For Example (Rate of tax assumed is 10%) Purchase Price Rs.100 Tax paid during purchase Rs.10 (input tax) Selling Price Rs.150 Tax collected during resale Rs.15 (output tax) Input tax credit (Tax paid during purchase) Rs.10 VAT payable (output tax input tax) Rs.5 Total tax collected by govt. At the time of purchase by the dealer Rs.10
At the time of resale by the dealer Rs.5 Total tax: Rs. (10+5) =Rs.15
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