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Cpt economics

Cpprasad (CA Student) (125 Points)

12 March 2014

VAT

Value added tax is a multistage sales tax with credit for taxes paid on business purchases.one of the major bebefits of VAT over sales tax is that the VAT avoids double taxation.

What is meant by multistage sales tax and how VAT avoids double taxation?

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2 Replies

Manoj Mehta (Head Of Department (Accounts & Finance)) (1479 Points)
Replied 12 March 2014

Dear this is very basic concept of vat and must question at ipcc level exams. So multistage sales tax mean tax on any value added on any product. Say for example cotton seller sell a product to textile industry and charge vat on the same for Rs.5. So he will have to pay the amount to state goverment. Similarly the textile industry will make cloths and sell to dealer and charge vat of Rs.10 then thier liability for vat will be Rs. 5 [I.e 10-5( vat which they paid on the bill amt of cotten seller)]. Hence this whole process comes under multistage tax and by providing credit of vat input double taxation effect is removed. I hope you understood if nit then read it in internet, there are many example on google. regards

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Cpprasad (CA Student) (125 Points)
Replied 12 March 2014

Originally posted by : Manoj Mehta
	Dear this is very basic concept of vat and must question at ipcc level exams. So multistage sales tax mean tax on any value added on any product. Say for example cotton seller sell a product to textile industry and charge vat on the same for Rs.5. So he will have to pay the amount to state goverment. Similarly the textile industry will make cloths and sell to dealer and charge vat of Rs.10 then thier liability for vat will be Rs. 5 [I.e 10-5( vat which they paid on the bill amt of cotten seller)]. Hence this whole process comes under multistage tax and by providing credit of vat input double taxation effect is removed. I hope you understood if nit then read it in internet, there are many example on google. regards