Hi Fellas,
I have just taken over the operations & finance of a retail outlet (petrol pump) and have been a little confused over the computation of VAT. The operations are in Gujarat, where VAT is higher....21% for diesel, 23% for petrol, etc.
My understanding of the computation is that the total VAT on sales less the VAT on purchase for a given month is the amount I pay as the VAT for that month. Which I understand is the right way to do it as I am paying VAT after deducting the credit on the VAT paid on purchase.
I am okay on the way the VAT is computed by the Oil Company, but my problem/confusion lies with the way the CA has been computing the VAT on sales. The CA computes the VAT on the total sale amount (Y-(Y/1.21)) instead of deducting the VAT (C), Cess (E) & License Fee (D) from the Total Cost plus the commission (0.75).
The way VAT is computed by the CA is:
|
Purchase |
|
|
Price |
600,000 |
|
Taxable Delivery Charge |
1,000 |
|
VAT (21%) |
126,210 |
|
License Fee Recovery |
500 |
|
Cess (3%) |
21,831 |
|
|
|
|
Total Cost |
749,541 |
|
|
|
|
Sales |
|
|
Selling Price @ Rs.42/ltr |
756,000 |
|
|
|
|
VAT (X-(X/1.21)) |
131,207 |
|
|
|
|
VAT payable (diff bw sales & purch) |
4,997 |
Shouldn’t the CA calculate VAT after deducting the Cess & License Fee Recovery charges? If not, what is the reasoning behind it?
Appreciate your help. Regards.
CAclubindia
