Double tax (VAT)

This query is : Resolved

shikha

( Author )
27 August 2012

We need to determine the price of a product and the tax liability on it. Below is the scenario:

We manufacture security system which we sell to our dealer at Rs 6000 + VAT @ 12.5 % Rs 750 = Rs. 6750

Now the Dealer Price is Rs 6750. Dealer margin is 10% on 6750 i.e Rs 675. So total 6750+675=7425
Dealer sells it to customer at 7425 + 12.5% VAT Rs. 928 = 8353.

Now we deposit tax of Rs 750 to IT department
And dealer deposits tax of Rs. 928 on same product.

Is this correct. Please explain using these figures. We are very confused about the price point of the product

Thanks Neeraj. I have an additional question in that case.
When my Dealer is raising a bill for customer what should be the amount of it:
7425+928 = 8353
or
7425+178 (928-750)=7603
which one is legally correct?

neeraj

( Expert )
27 August 2012

U have to deposit VAT collected i.e. Rs.750.
Whereas dealer will get credit on VAT paid and he will have to deposit 928-750=178 Rs. to govt.

shikha

( Author )
27 August 2012

Thanks Neeraj. I have an additional question in that case. When my dealer is raising a bill to his customer what should be the amout of it:

7425+928 = 8353

or
7425+178 (928-750) = 7603

which one is legally correct

shikha

( Author )
27 August 2012

CA Ankit Varia

( Expert )
27 August 2012

Dear Shikha,

The dealer would raise a bill of Rs.8353.

shikha

( Author )
27 August 2012

Thanks Ankit. 1 more related query:

MRP is inclusive of tax and bill does not reflect the base amount & Tax amount. In that case which amount should be used for billing 7603 or 8353

CA Ankit Varia

( Expert )
27 August 2012

You have to bill whatever you need to recover from customer. There fore it includes both base price and tax amount.

U S Sharma

( Expert )
27 August 2012

When MRP is fixed then the calculation would go reverse from end customer to dealer to manufacturer, coz at the end of all the MRP must not exceed the printed price.

plz put MRP to discuss the calculation.

shikha

( Author )
27 August 2012

Ankit: Tax and net ttax payable are 2 different figures. Tax @ 12.5 % on 7425 is 928 whereas net tax payable is 178 (928-750).

Can a bill reflect 928 however actual payment to govt is only 178 towards it?

Again recoverable from customer is CP + Dealer margin + Tax. Now we are clear about CP and Dealer margin however until we know tax liability we cant price it properly.

Mr. Sharma: MRP is 15125 however discounts are common in bulk deals. Sometime discount is offered in retail as well

Vineet

( Expert )
27 August 2012

In that case your cost is 6750 plus 12.5% taxes, and you add your margin of Rs 675.

you total price charged to the customer is (6750+675)+(6750+675)*12.50/100 =8353.

Bill shows a tax of Rs 928 as you were suppose to pay that much but as you have the input tax credit of 750, your tax liability in that case would be 178.

But if you want to be competitive or give discount of input tax credit to the customer, in that case you can provide the discount on the base value..but first part is absolutely correct.

shikha

( Author )
28 August 2012

Thanks everyone for help. Great Help!