VAT ON PROFIT

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Querist : Anonymous

Querist : Anonymous (Querist)

10 July 2011 How is VAT charged only on profit by PSI UNITS treated after one sale i.e. sale by PSI Unit to its customer? Is the customer who a registered dealer under MVAT Act, able to claim set off from VAT paid on such purchase?
Or he should also further sale by charging just VAT on his profit? May I also have any references to any such section?

CS Bijoy

CS Bijoy (Expert)
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11 July 2011 According to me the VAT is nothing but just the Value Added Tax means the Tax is collected only on the value by which the purchase price is increased and in case the value of purchase and the value of sale is equal than no VAT is charged.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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11 July 2011 You should understand the meaning of VAT. VAT. stands for Value Added Tax.

This means you have to pay VAT only the amount of Value you have added on your purchased.

Suppose you have purchased a pen for Rs. 300 and VAT charged on it is 10% then the cost to you for the Pen is 330/-. Now you are selling the Pen for 400/- and charging VAT 10% therefore the buyer has to pay Rs. 440/-. Here, you have added the value of Rs. 100/- so on 100 you have to pay the Vat. How, You have collected Rs. 40/- As VAT and you have already paid VAT of Rs. 30/- so you have to pay the balance VAT of Rs. 10/- and not Rs.40?- as has been collected by you.

The adjustment of VAT paid by you is called Set Off.

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