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Discussion > VAT >

VAT for Petrol Pump

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self employed

[ Scorecard : 25]
Posted On 31 January 2011 at 08:03 Report Abuse

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.


Online classes for CA CS CMA



Pankaj Arora
Accountant/Learner

[ Scorecard : 2744]
Posted On 31 January 2011 at 10:33

 

Yes calculation of input vat will be excluding cess & license fee recovery  on purchase. You can only take input credit of vat.





satyendra kumar singh
Manager-Finance & Accounts

[ Scorecard : 100]
Posted On 31 January 2011 at 12:00

Dear Sameer ,

CA calculation is right "you can take input only which you have paid."




SAMAR JEET SINGH
CA

[ Scorecard : 72]
Posted On 31 January 2011 at 14:56

Hi Sameer

1. Your understanding of the Vat is correct i.e., We take the credit of the VAT we pay on purchases and Debit the VAT amount we collect on sales.

VAT on sales (-) VAT on purchase = Net payable VAT

In other words VAT is payable only on the value addition made by the dealer.

2. When invoice is raised by any seller he show the price and Vat seperately

In your case selling price does not bifurcate the Price and vat, which means it is inclusive of the VAT. SP will be 1+.21=1.21

So to understand the formula Y-(Y/1.21) 

 

Where y means Sale price

Y/1.21 means the price of the fuel

if                1.21  = 42  or 756000

 So to find 1.00  =  ?  (which is price in your case)  

 (42*1)/1.21 or   (756,000*1)/1.21

= 34.71 or 6,24,793.39

So the vat = 756000-624793.39 = 131206.61


As your CA does not have clear bifurcation he is using this formula.

3. Taking credit on cess is a debatable matter refer different case laws & notification, and recovery of licesnse fees is concerned you can deduct if you can bifurcate the same from the Sale price.

Regards




Sameer
self employed

[ Scorecard : 25]
Posted On 31 January 2011 at 18:04

@ Samar ....thanks for the clarity on the computation, my problem is the 3rd point you raised, which is the application of 21% on the entire amount. Why am I paying 21% on the entire amount, thereby reducing my margin/ commission.


If someone is familiar with the exact notification or case law which eludes about this, please let me know. I would like to get this right.


Appreciate everyone's help.

Regards.




Ramakoteswar
programmer

[ Scorecard : 21]
Posted On 19 May 2014 at 17:31

Sir,

How to calculate VAT on Petrol/HSD & Lubs by petrol filling station owners.

Illustration please

by Rama



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