VAT - Composition Scheme

within certain turnover limit set by the state vat authority one can opt for composition scheme . They have to pay only  1 or 2 percent of sale as tax. They cannot use input tax on purchase for setting off output tax. Still if a person buying from CST and selling in local market can make good use .

composition scheme of vat is enclosed with this reply.....it is just out line and covered entire topic and just go through that.

What is works contract and composition?

is composite vat scheme applicable to medical field? to retailers?

Hi

To explain in simple words, in works contract, transfer of property (sale) do not happen in ready form. While executing work, goods get transferred like construction wherein while constructing goods viz., bricks, cement, sand gets transferred to the buyer.

In composition scheme, the works contractor will have the option to pay tax at lesser rate. For ex. a works contract may be liable for tax at 14%. By opting for composition the contractor will get the reduced rate of VAT, say 5%, but however he has to forego the benefits of claiming labour charges as deduction from the total work done as well availing input tax credit in order avail teh benefit of reduced rate of tax.

In case of dealers, the person can opt for composition wherein the rate of VAT will substantially be low. Ex. in Karnataka VAT on dealers is 1% provided the total sales of the dealer is less than 25 lacs and no credit can be claimed on tax paid on purchases. Also such dealer cannot purchase goods from buyers outside the state.