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Aug 10, 2008 11:10 am |
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re: Value Added Tax |
Porus Vazifdar
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VAT by its very name is a tax on the vaue added to a product by the relevant intermediary, and prevents double taxation. Take this example -
Artist A sells a work to Dealer D for Rs10,000/-. Dealer D further sells to Collector C for Rs.13,000/-. Assuming a VAT of 12.5% on this product and in the state of purchase and sale, VAT would be calculated at each stage as follows:
A would sell to D
Painting 10,000 VAT 1,250 ------- Total to D 11,250 ======= On collecting Rs11,250/- from D, A will pay Rs.1,250 over to the Government.
When D sells to Collector C, he would collect and pay VAT as follows:
Painting 13,000 VAT 1,625 ------ Total To C 14,625 ====== D would collect Rs1,625 as VAT from C and pay Rs.375 (Rs1,625-1,250) to the Government. He has already paid the balance of Rs.1,250 to A.
As a result the government would earn totally Rs1,625 as VAT from this transaction and as you can see there is no double taxation.
This is a simplistic example and various complications could arise dependent on the case at hand.
I've realised, in discussions wtih artists, that generally artists do not register themselves wtih VAT authorities and do not collect VAT. If they, indeed, need to register and collect, then they should act accordingly.Private Reply to Porus Vazifdar (new win) |
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