VAT - Varama Saapama???

VAT - Value Added Tax is going to implement in TN with effect from the new year.Many seems to be confused on the concept of VAT which seems to be a magical word.Some counties like singapore VAT is called in different name as GST(Goods and Service Tax).

Simple la VAT ta sollanumna, oru porul vithu vara lapathula(not on the actual price) ellarum (all in the part of the supply chain) Govt gu some % tax kudukanum. That % in INDIA isdefined as (4%,12.5%,18%) depends on type of the products.

VAT replaced state Govt owned sales & resale taxes which are supposed to be multi-point tax which is simple,but have some real time issues.
By one simple example, one could easily understand how VAT works.Consider the following supply-chain scenario,

1. The manufacturer pays Rs 110 (Rs 100 + 10%) for the raw materials,and the seller of the raw materials pays the government Rs 10.

2. The manufacturer charges the retailer Rs 132 (Rs 120 + Rs 10) and pays the government 2 (12 minus 10), leaving the same profit of Rs 20.

3. The retailer charges the consumer Rs 165 (Rs 150 + 10%) and pays the government Rs 3 (15 minus 12), leaving the same profit of Rs 30.

At every hook of the supply chain the product's value is increased anda share on that profit has sent to GOVT.

Consumer end: Since the % of VAT is depends on type of the product, few could raise and few could fall. So generally,Not much impact on the consumer front.

Vendor end : The retailer whose annual turn over is less than Rs 10 lacs dont comes under VAT Taxation. For others, account maintenance might be an issue,but free from sale & resale taxes.

Govt end : More tax revenue is expected from VAT since tax has been collected at every

production point.But the state Govt would loss heavily since they loose their sales tax income, but the lose would be compensate by the central Govt's special fund package.

Advantage of VAT :
Controlling Tax fraud and uniformity of tax rate across the country.

Disadvatage of VAT :
There is no VAT on export goods since the target consumer is in other contry and the seller can recollect the VAT from GOVT. This is where the fraud starts, fake claims of VAT collect from GOVT.
Account maintenance on each hook of the supply chain.

OverAll : VAT is good for the indian booming economy so that namalum urooda othu poi, naanum oru rowdy thaan nambunganu vadivelu style la sollalam.