VAT on purchases/services
This query is : Resolved
07 December 2007
Our company have a caterer who provides meals, snacks etc for a rate per item.
For snacks the rate is Rs. 6.00 per unit + VAt + service tax. The M.R.P.( as mentioned on the cover of the pack)of the said item is Rs.4.00.
If the M.R.P. includes sales tax, doesen't charging tax by the caterer result in cascading effect.
For snacks the rate is Rs. 6.00 per unit + VAt + service tax. The M.R.P.( as mentioned on the cover of the pack)of the said item is Rs.4.00.
If the M.R.P. includes sales tax, doesen't charging tax by the caterer result in cascading effect.
07 December 2007
Your question is not clear. M.R.P. shown on the pack is inclusive of VAT or not? Please make it cler that on which amount the caterer is charging VAT.
08 December 2007
M.R.P. printed on Good day biscuits is Rs. 4.00 (inclusive of all taxes).
An agreement has been entered into with the caterer and in the annexure list of various items including meals, snacks and rates against the same are given.
The price per biscuit is Rs. 6.00.
In addition he charges 4 % VAT.
My question is since the price of Rs. 4.00 includes Tax, doesen't the amount charged by the caterer amount to double taxation.
An agreement has been entered into with the caterer and in the annexure list of various items including meals, snacks and rates against the same are given.
The price per biscuit is Rs. 6.00.
In addition he charges 4 % VAT.
My question is since the price of Rs. 4.00 includes Tax, doesen't the amount charged by the caterer amount to double taxation.
09 December 2007
Dear Sir
You are right. When MRP includes tax also, then the material price should be arrived at as follows-
M.R.P
------------ * 100
100+VAT Rate
If 4% is the applicable VAT rate, then,
Rs 4
------------ * 100 = Rs 3.85
(100+4)
Add: VAT @ 4% = Rs 0.15
Price of Biscuit = Rs 4.00
You are right. When MRP includes tax also, then the material price should be arrived at as follows-
M.R.P
------------ * 100
100+VAT Rate
If 4% is the applicable VAT rate, then,
Rs 4
------------ * 100 = Rs 3.85
(100+4)
Add: VAT @ 4% = Rs 0.15
Price of Biscuit = Rs 4.00
10 December 2007
Does it mean there is a cascading effect and ask for refund of tax charged?
10 December 2007
You have entered in to a contract with supplier (caterer) and considering his services or some thing else, you have agrred to pay a higher price against purchase of Biscuits. It appears that as per your contract, the sale value of Biscuits have been fixed at Rs. 6/- + VAT as applicable
Now if goods is sold at Rs. 6/-, VAT is chargeable on Rs. 6/- (being the sales price). Whether goods have been sold at MRP or at other rates, will not effect the VAT liability.
However, if in your state (Like in Assam), Biscuits are subject to single point VAT and your supplier is purchasing the same from within the State, he will not be authorised to collect any amount of VAT on such sales of Biscuits.
Now if goods is sold at Rs. 6/-, VAT is chargeable on Rs. 6/- (being the sales price). Whether goods have been sold at MRP or at other rates, will not effect the VAT liability.
However, if in your state (Like in Assam), Biscuits are subject to single point VAT and your supplier is purchasing the same from within the State, he will not be authorised to collect any amount of VAT on such sales of Biscuits.
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