Friday, 27 December 2019

Unit 14: Value Added Tax

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Unit 14: Value Added Tax

In this unit we have discussed about Value Added Tax and its basic features.

VAT as proposed is intended to revolutionize our tax system, be responsive to economic activity, and make a real contribution to nation building.

It is our belief that VAT will bring higher levels of efficiency in the tax system, thereby creating a new culture of voluntary compliance amongst tax payers.

VAT is a multi-stage tax, levied only on value that is added at each stage in the cycle of production of goods and services with the provision of a set-off for the tax paid at earlier stages in the cycle/chain.

The aim is to avoid ‘cascading’, which can have a snowballing effect on the prices.

It is assumed that because of cross-checking in a multi-staged tax, tax evasion would be checked; hence resulting in higher revenues to the government.


Business: It includes any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and, whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern and any transaction in connection with or incidental or ancillary to such trade, commerce, manufacture, adventure or concern.

Manufacture: The conversion of goods into a new form, whereby an altogether different article emerges.

Place of supply: The country where a supply of goods or services is said to be made for VAT purposes.

Supply: Selling or otherwise providing goods or services, including hire purchase and lay away.

Supply of goods: When exclusive ownership of goods passes from one person to another.

Tax period: The period of time covered by your VAT Return, i.e., one calendar year.

Taxable person: Any business entity that buys or sells goods or services and is required to be registered for VAT - this can be an individual, partnership, company, club, association or charity.

Taxable supplies: All goods and services you sell or otherwise supply which are liable to VAT at the standard, reduced or zero rate – whether or not you are registered for VAT.

Taxable turnover: The total value – excluding VAT – of the taxable supplies you make in the UK (excludes capital items like buildings, equipment, vehicles or exempt supplies).

Indirect Tax Laws Notes Turnover: The aggregate of the sale prices in respect of sales of any goods in the course of inter- State trade or commerce, made during any prescribed period.

VAT Registrant: This is a taxable person registered to charge VAT on supplies to consumers.

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