Harinder (student) (219 Points)
06 July 2011My query is; as we have to pay VAT on purchases to our suppliers and VAT on Sales to State Goverments (Though only the excess of VAT on purchases), isn't this something like taxing twice as we will also be paying the Income Tax.
Here, the excess of VAT will be a part of sales and Income Tax will applied on the VAT as well. Please correct me if I'm wrong. Thanks in advance.
Nikhil Gupta
(CA Final)
(99 Points)
Replied 06 July 2011
Friend ,
Actually your query is very obvious.
1) VAT
VAT is Indirect Tax and you are shifting your burden to end user.
It means you are not paying a peny from your own pocket as VAT on Sales to Indian Government.
You are paying VAT in case of Purchases of Commodity & you get a VAT Credit when you sale that article. Only the difference you have collected had to be paid to government.
2) Income Tax
Income Tax is a Dirct tax and it is our own burden it cannot be shifted.
It means now you are paying taxes to the government on the Income(Profit).
Conclusion:-
From above discussion we can easily conclude that VAT and Income Tax are different and we cannot shift the credit of one another.
Nikhil Gupta
(CA Final)
(99 Points)
Replied 06 July 2011
Thanx But i was looking for a good suggestion.
Swati
(Partner at BIDS & Co.)
(51 Points)
Replied 06 July 2011
Harinder
(student)
(219 Points)
Replied 06 July 2011
Thanks everybody!!! but whole idea behind my query was, isn't application of Income Tax is actually on coming on VAT (after CENVAT). If I'm not wrong, I would be paying Income Tax on VAT as well.
ashish gupta
( student)
(1922 Points)
Replied 07 July 2011
you will not be paying income tax on VAt amount.
Income tax is not levied on sales but on profits, and the VAT you deposit to the state government is allowed as expenditure. Further also the VAT paid on purchases is added to the cost of purshases as per tha tax laws
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