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Quantum of VAT payment to come down under new act

Quantum of VAT payment to come down under new act

Despite increase in the rate from 11% to 15% Quantum of VAT payment will come down under the proposed amendment to VAT Act, Finance Ministry announced in a press release on Monday.

Although the retail and wholesale merchants whose daily turnover exceed Rs.138, 000 will be brought under the threshold for the payment of VAT, in accordance with the proposed VAT amendment Bill, the VAT will really be charged only on the revenue accumulated on the sale of vatable goods.

The new amendment to the VAT Act, envisages imposition of 15% VAT, instead of the current 11%. Though it appears that there is an increase in the rate but in real term the quantum of payment to be made under the new amendment will come down due to the elimination of the hidden payment that was in the existing system.

For instance if a merchant whose daily turnover is Rs.200,000 and the revenue from the sale of goods liable for VAT is Rs 50,000 he has to pay only Rs 7500.00 being the 15 % VAT for that Rs50,000 under the new amendment. Whereas under the existing system though the VAT payable is 11 %, the same merchant who has the turnover of Rs 200,000 will have to pay more. While paying Rs 5,500 being the 11% VAT for the revenue of Rs 50,000 he also had to pay an additional 11 % for the revenue of Rs 200,000 minus the maximum exemption of 25 percent granted on the total revenue.

Accordingly, a merchant whose daily revenue is Rs 200,000 under the existing VAT Act had to pay altogether Rs 16,500 being the 11 percent VAT whereas the same merchant under the proposed amendment has to pay altogether Rs 7,500 only though the rate of VAT will be increased to 15 percent.

 

Last modified on Wednesday, 28 September 2016 10:28