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VAT

bhumika (Studying) (73 Points)

30 December 2008

VAT is calulated on material cost ONLy or on the total

As i am conducting an audit and they are saying vat is caluculated on the total amount means material cost + exp related to purchase.

Is it true?

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7 Replies

VIKAS R AGRAWAL (STUDENT) (57 Points)
Replied 05 January 2009

VAT IS CALCULATED ON TOTAL AMOUNT.

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CA Parvin Ahuja (Chartered Accountant) (408 Points)
Replied 10 January 2009

In fact vat is calculated on total sales price which includes everything even profit element also.

Shudhanshu Agrawal (Business) (2570 Points)
Replied 11 January 2009

Yeah VAT is calculated on the Total bill amount inclusive of all kind of expenses.

Ameet (L) (1678 Points)
Replied 12 January 2009

In addition, Pls note that there are certain exps claim as deduction.

bhumika (Studying) (73 Points)
Replied 21 January 2009

Originally posted by :Ameet
"	In addition, Pls note that there are certain exps claim as deduction.	"

hey but iwant a book refernce to this.

VaT IS CALCULATED ON MATERIAL COST PLUS RELATED COST TO THE PURCHASE ALSO....BUT WHAT IS THE LOGIC BEHIND THIS??

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bhumika (Studying) (73 Points)
Replied 21 January 2009

Originally posted by :CA Parvin Ahuja
"	In fact vat is calculated on total sales price which includes everything even profit element also.	"

I(f Vat is calculkated on material cost plus profit element. It's okey. But then one will not add the related exps. and send a seprate bill for that to avoid Vat. Then can we do like this>

balaji rao (service) (27 Points)
Replied 22 January 2009

Vat laws of respective states contains provisions of sales price, for example West Bengal VAT has following provision.

Sec 2(41)

"sale price" means the amount payable to a dealer or casual dealer as

valuable consideration for the sale, other than the sale referred to in

section 14, of any goods and includes ––

(a) any sum charged for anything done by the dealer or casual dealer in

respect of such goods at the time of delivery, or before delivery, of

such goods,

(b) any sum charged for freight, delivery, distribution, installation or

insurance, by such dealer at the time of delivery, or before delivery,

of such goods,

charged separately under this Act, subject to the provision as

mentioned in the Explanation and cess levied under the West

Bengal Transport Infrastructure Development Fund Act, 2002), in

respect of such goods,

but does not include any sum allowed as cash discount, commission or

other commercial rebate on the value of such goods at the time of

delivery, or before delivery of such goods and interest if separately

charged.

Explanation.–– For the purpose of this clause, the expression "sale price"

of a dealer, enjoying payment of tax at a compounded rate under subsection

(3) of section 16 or sub-section (4) of section 18, or selling to any

person other than a dealer of goods upon which maximum retail price as

the referred to in clause (22 A) is applicable and where such maximum

retail price is inclusive of sales tax, shall include any tax payable under

this Act, including the tax referred to in section 10, or section 12;

You need to refer VAT Act of your state to get the idea of what is allowed as deduction

Most of the states allow deduction for Trade discount. Some of the state allow deduction for Quantity discount from sale price.

There is nothing called cost+Expenses+Profit in Vat on Sales Amt. These thing are relevant in taxation of Work Contracts (i.e contracts for a work where in transfer of property takes place like building contraction).

In case you need further clarification you can send your query at balaji_857 @ rediffmail.com

B RAO