CONCEPTS OF VAT AND THE SALES TAX ACT, 1990

VAT
A TAX CHARGED, LEVIED AND PAID

ON THE VALUE OF THE GOODS.

A TAX ON ADDED VALUE BY VIRTUE OF ADJUSTMENT OF TAX ALREADY PAID.

ILLUSTRATION
VALUE OF SUPPLY 125/- O/TAX @16% 20/ VALUE OF PURCH. - 100/- I/TAX @16% - 16/-

NET PAYABLE AFTER ADJUSTMENT

DIFF. OF VALUE OR ADDED VALUE TAX @ 16%
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4/-

- 25/4/-

VAT

VALUE ADDED OR VALUE ADDITION AN INCREASE IN THE PRICE OR VALUE OF ANY PRODUCT AT ANY STAGE OF SUPPLY CHAIN FROM MANUFACTURE THROUGH DISTRIBUTION TO CONSUMPTION
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VAT
TAX ON NET VALUE ADDITION BASIS AUTHORITY CONDITIONALLY OR OTHERWISE SPECIFY ANY GOODS IN RESPECT OF WHICH TAX SHALL BE LEVIED & COLLECTED ON THE BASIS OF NET VALUE ADDITION AT THE TIME OF SUPPLY.

VAT
DETERMINATION OF TAX LIABILITY A REGISTERED PERSON SHALL CALCULATE AND DISCHARGE HIS TAX LIABILITY DURING A TAX PERIOD BY DEDUCTING INPUT TAX PAID BY HIM FROM THE OUTPUT TAX DUE FROM HIM AFTER SUCH ADJUSTMENTS AS ARE ADMISSIBLE.

SALES TAX
SALES TAX IS CHARGED, LEVIED AND PAID ON

VALUE OF TAXABLE SUPPLIES OR IMPORT UNDER SECTION 3 OF THE SALES TAX ACT, 1990. CHARGED ON ALL TAXABLE SUPPLIES BY A REGISTERED PERSON IN THE COURSE OR FURTHERANCE OF A TAXABLE ACTIVITY AND ON IMPORT.

SALES TAX
TAXABLE ACTIVITY AN ACTIVITY CARRIED ON BY A PERSON NOT NECESSARILY FOR PECUNIARY PROFIT AND INVOLVES IN SUPPLY OF GOODS TO ANOTHER PERSON IRRESPECTIVE OF ANY CONSIDERATION. AN ACTIVITY CARRIED ON IN THE FORM OF BUSINESS, TRADE OR MANUFACTURE.

SALES TAX
FOR A SUPPLY WITHIN THE AMBIT OF SALES TAX THERE SHALL BE; - REGISTERED PERSON. - COURSE OR FURTHERANCE OF ANY TAXABLE ACTIVITY. - CONSIDERATION IN MONEY OR KIND WHICH A SUPPLIER RECEIVES.

SALES TAX SALES TAX A VALUE ADDED TAX SALES TAX LEVIED AT EVERY STAGE, THE VALUE ADDITION TOOK PLACE AT THE TIME OF SUPPLY NOT A ONE POINT TAX. TAX LIABILITY DETERMINED ON THE BASIS OF VALUE OF TAXABLE SUPPLY AND ARISE WHEN SUPPLY IS MADE. SUPPLY IS MADE BY A R.P. - REGISTERED OR REQUIRED TO BE REGISTERED.

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SALES TAX TAXABLE PERSON & EXEMPT PERSON. T.P. PAYS TAX ON PURCHASE OR IMPORT AND COLLECT TAX. E.P. PAYS TAX ON PURCHASE OR IMPORT BUT DOES NOT COLLECT TAX. T.P. (R.P.) MAY DEDUCT THE TAX PAID AGAINST THE TAX COLLECTED. SUCH DEDUCTION IS CALLED ADJUSTMENT AND ALLOWED U/S 7 OF THE SALES TAX ACT, 1990.
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SALES TAX SCOPE OF SECTION 7 DETERMINATION OF TAX LIABILITY. FACILITATES A R.P. TO ADJUST INPUT TAX AT THE TIME OF MAKING PAYMENT OF OUTPUT SALES TAX. FOR SUCH ADJUSTMENT HE MUST; - HOLDS A TAX INVOICE /GD IN HIS NAME. - IN CASE OF GOODS ACQUIRED IN AUCTION HE HOLDS A T.C. BEARING HIS NAME,STRN & SHOWING PAYMENT OF SALES TAX.
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SALES TAX ENTITLEMENT (TO GIVE A RIGHT) TO DEDUCT INPUT TAX PAID ON THE GOODS USED OR TO BE USED FOR THE PURPOSE OF MANUFACTURE OF TAXABLE GOODS OR FOR TAXABLE SUPPLIES MADE OR TO BE MADE. R.P. IS NOT BURDENED WITH THE LIABILITY TO DOUBLE TAXATION. SECTION 7 IS NOT THE CHARGING SECTION BUT PERTAINS TO THE DOMAIN OF PAYABILITY.
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SALES TAX
CLAIM OF INPUT TAX IS A STATUTORY RIGHT

AND CAN NOT BE DENIED OR DEFEATED.

TO AVOID DOUBLE TAXATION OR CASCADING

A MECHANISM OF INPUT TAX AND ITS ADJUSTMENT IS PROVIDED.

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SALES TAX SCOPE OF SECTION 7A TO EMPOWER F.G. TO LEVY AND COLLECT TAX ON SPECIFIED GOODS ON VALUE ADDITION OR ON THE DIFFERENCE BETWEEN THE VALUE OF SUPPLY THE GOODS ARE ACQUIRED AND THE VALUE FOR WHICH THE GOODS AFTER MANUFACTURE ARE SUPPLIED. ALSO TO SPECIFY THE MINIMUM VALUE ADDITION FOR CERTAIN PERSONS FOR SUPPLY OF GOODS.

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SALES TAX OBJECTIVE IN ORDER TO BRING UNDOCUMENTED/UNORGANIZED SECTOR INTO THE TAX NET. THROUGH A FORMULA & BY DEVISING METHODS, SUCH AS STEEL MELTORS AND REROLLERS OR COMMERCIAL IMPORTERS. IT IS AN ADDITION AND COMPLEMENTRY TO SECTION 2(46).

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