VAT - Value Added Tax in India

VAT Definition

As per Wikipedia; a value added tax or value-added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs.
The "value added" to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products.

VAT in Indian Context

Taxes are an important part for the growth of a nation and in this context VAT which stands for Value Added Tax and is applicable only to the sale of ‘Goods’. The ‘Value’ refers to the modifications made to an input before it is sold to a consumer. For example, a company dealing in textiles adds value to the cotton yarn (input) by dyeing, modifying and stitching it before selling it as a t-shirt. It will thus pay VAT on the difference between the cost of the cotton yarn and the sale value of the T-shirt.

VAT implications for E-entrepreneurs

if you are selling groceries online, you would be liable to VAT.  Further, if you charge a delivery fee to deliver them to your clients, you are also providing a service, i.e. the delivery of fresh fruits and vegetables to the customer’s doorstep. Now since both these are distinct, you may end up having to pay both VAT and service tax.
Conclusion
Thus as an entrepreneur one has to draw a fine line between service tax and VAT and one can consider services of a chartered accountant to avoid filing two returns. However if one has to be on the right side of the law one should pay all taxes like we make payment as only than we can be called as the best stock market tips provider in India. You can get to know more about service tax here.

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