What Are The Main Characteristics Of VAT?

What is VAT and its features?

VAT is a type of indirect tax which is levied on consumers on the sale of goods and services, and at the time of sales.

Hence it is an indirect tax.

It is also a multistage tax where the tax is levied at each step of production of goods that involve sale/ purchase.

VAT is levied on local as well as imported goods..

What does a VAT mean?

Value Added TaxThe Value Added Tax, or VAT, in the European Union is a general, broadly based consumption tax assessed on the value added to goods and services. It applies more or less to all goods and services that are bought and sold for use or consumption in the European Union.

Who can claim VAT back?

Services – You can claim back VAT on services such as accounting and legal services that the business purchased in the previous six months from the date of VAT registration. You must have clear records, such as VAT receipts, and include the total amount of VAT you are claiming back in your first VAT Return.

Who is paying VAT?

In principle, VAT applies to all provisions of goods and services. VAT is assessed and collected on the value of goods or services that have been provided every time there is a transaction (sale/purchase). The seller charges VAT to the buyer, and the seller pays this VAT to the government.

What is the VAT rate?

20%The standard rate of VAT increased to 20% on 4 January 2011 (from 17.5%). Some things are exempt from VAT , such as postage stamps, financial and property transactions. The VAT rate businesses charge depends on their goods and services. Check the rates of VAT on different goods and services.

What are the characteristics of value added tax?

Characteristics Of Value Added Tax (VAT)VAT is a form of indirect taxation.VAT is a broad-based tax as it covers the value added to each commodity by a firm during all stages of production and distribution.VAT is based on value added principle. … VAT is a substitute for sales tax, hotel tax.More items…

How many types of VAT are there?

Despite state-specific implementations, VAT in India can be divided into four main subheads. NIL VAT Rate: In a lot of states items that are very basic in nature are sold without levying any VAT on them. These items are mostly those sold by the unorganized sector in their most basic or natural form.

What are the main characteristics of VAT What are its important from revenue point of view?

-It is an indirect tax on spending; it is not collected directly from the consumer, but from the charged institutions and individuals who, in turn, rely on the consumer in the form of an increase in the price of sold goods or services subject to the tax.

Why do we need VAT?

It is like a fee which we pay to government for funtioning in its territory. For example, income we earn on a territory, we have to pay income tax to the respective government on whose territory such income is earned. Similarly, VAT (value added tax) is a form of tax levied on sale of goods.

What’s the difference between sales tax and VAT?

Sales tax is collected by the retailer when the final sale in the supply chain is reached via a sale to the end consumer. … VAT (Value-Added Tax) is collected by all sellers in each stage of the supply chain. Suppliers, manufacturers, distributors and retailers all collect the value added tax on taxable sales.

How can I avoid paying VAT?

Avoid paying VAT – the legal wayMake your own sandwiches. You don’t pay VAT on most food stuffs, especially basic ingredients such as bread, salad, fruit and cheese. … Buy biscuits carefully. … Give books as presents. … Don’t buy drinks on the go. … Holiday overseas. … Make your own smoothies. … Buy kids clothes. … Buy from overseas sites.More items…•