All Courses
Get the App Signup / Login
Sign in Open App
B Com Exam  >  B Com Notes  >  Indirect Tax Laws  >  Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws

Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws | Indirect Tax Laws - B Com PDF Download

There are several methods to calculate the “value added” to the goods for levy of tax. The 3 commonly used methods are:

  1. Addition Method
  2. Subtraction Method
  3. Direct subtraction Method
  4. Indirect/Intermediate subtraction Method
  5. Invoice Method

 

S.N. Method VAT Liability Value Added means Popularity of the method
1 Addition Method Value Added X Tax Rate Factor payments + Profit Hardly used
2 Subtraction Method In General:Sales – Purchases Hardly used  

1. Direct Subtraction method

 Value Added X Tax Rate Aggregate value of sales (exclusive of tax) – Aggregate value of purchase (exclusive of tax)    

1. Indirect Subtraction/Intermediate Subtraction method

 Value Added X [Tax Rate/(100 + Rate)] Aggregate  value of sales (inclusive of tax) – Aggregate value of purchase (inclusive of tax)    
3 Invoice Method Tax on Sales – Tax on Inputs Widely used  

Demerits of Addition method:

  1. No set off or tax credit
  2. Not possible to detect tax evasion
  3. Profit margin is transparent
  4. Does not easily accommodate exemptions of intermediate dealers

Demerits of Subtraction method

  1. No set off or tax credit
  2. Tax payable is calculated periodically and not invoice-wise
  3. Not showing tax amount in invoice is not healthy practice
  4. Inconsistent when the rate of tax is different

Invoice Method – Merits

  1. Common and popular method
  2. No tax evasion
  3. No Revenue Loss
  4. Beneficial for the industry and trade.
  5. Profit margin is not known to competitor and customer

Note:  There are bill traders in the market who issue “fake/bogus invoices” for consideration. An unscrupulous dealer may use such invoices to claim ITC (input tax credit).

The document Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws | Indirect Tax Laws - B Com is a part of the B Com Course Indirect Tax Laws.
All you need of B Com at this link: B Com
50 videos|54 docs
Join Course for Free

FAQs on Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws - Indirect Tax Laws - B Com

1. What is Value Added Tax (VAT)?
Ans. Value Added Tax (VAT) is an indirect tax levied on the value added at each stage of production or distribution of goods or services. It is based on the consumption of goods or services and is ultimately borne by the final consumer.
2. How is Value Added Tax (VAT) computed?
Ans. Value Added Tax (VAT) is computed by multiplying the tax rate with the value added at each stage of production or distribution. The value added is calculated by subtracting the cost of inputs from the selling price of the goods or services.
3. What are the methods of computing Value Added Tax (VAT)?
Ans. There are two methods of computing Value Added Tax (VAT): the invoice or credit method and the subtraction or deduction method. - The invoice or credit method involves calculating VAT based on the invoices issued and received during a specific period. The VAT payable is the difference between the VAT on sales (output VAT) and the VAT on purchases (input VAT). - The subtraction or deduction method involves calculating VAT by subtracting the VAT paid on purchases from the VAT collected on sales during a specific period. The VAT payable is the difference between the two amounts.
4. How does Value Added Tax (VAT) help in tax administration?
Ans. Value Added Tax (VAT) helps in tax administration by providing a transparent and efficient system for collecting tax revenue. It reduces the cascading effect of taxes as it is levied only on the value added at each stage. VAT also encourages compliance as businesses are required to maintain proper records and submit regular VAT returns.
5. What are the advantages of Value Added Tax (VAT)?
Ans. Value Added Tax (VAT) has several advantages: - It provides a stable and sustainable source of tax revenue for the government. - It reduces the tax burden on low-income individuals as VAT is generally a proportional tax. - It promotes transparency and accountability in the tax system. - It encourages formalization of the economy as businesses need to register for VAT. - It allows for tax credits on inputs, which incentivizes businesses to invest and grow. - It is relatively easy to administer and enforce compared to other forms of indirect taxes.
Related Exams
About this Document
4.95/5 Rating
Dec 23, 2024 Last updated
Document Description: Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws for B Com 2024 is part of Indirect Tax Laws preparation. The notes and questions for Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws have been prepared according to the B Com exam syllabus. Information about Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws covers topics like and Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws Example, for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises and tests below for Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws.
Introduction of Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws in English is available as part of our Indirect Tax Laws for B Com & Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws in Hindi for Indirect Tax Laws course. Download more important topics related with notes, lectures and mock test series for B Com Exam by signing up for free. B Com: Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws | Indirect Tax Laws - B Com
Description
Full syllabus notes, lecture & questions for Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws | Indirect Tax Laws - B Com - B Com | Plus excerises question with solution to help you revise complete syllabus for Indirect Tax Laws | Best notes, free PDF download
Information about Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws
In this doc you can find the meaning of Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws defined & explained in the simplest way possible. Besides explaining types of Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws theory, EduRev gives you an ample number of questions to practice Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws tests, examples and also practice B Com tests
50 videos|54 docs
Join Course for Free
Download as PDF
Explore Courses for B Com exam
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
10M+ students study on EduRev
Related Searches

study material

,

shortcuts and tricks

,

Viva Questions

,

ppt

,

Exam

,

MCQs

,

Extra Questions

,

past year papers

,

practice quizzes

,

Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws | Indirect Tax Laws - B Com

,

Previous Year Questions with Solutions

,

Summary

,

video lectures

,

pdf

,

Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws | Indirect Tax Laws - B Com

,

Semester Notes

,

Objective type Questions

,

Important questions

,

Free

,

mock tests for examination

,

Sample Paper

,

Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws | Indirect Tax Laws - B Com

;
Additional Information about Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws for B Com Preparation

Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws Free PDF Download

The Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws is an invaluable resource that delves deep into the core of the B Com exam. These study notes are curated by experts and cover all the essential topics and concepts, making your preparation more efficient and effective. With the help of these notes, you can grasp complex subjects quickly, revise important points easily, and reinforce your understanding of key concepts. The study notes are presented in a concise and easy-to-understand manner, allowing you to optimize your learning process. Whether you're looking for best-recommended books, sample papers, study material, or toppers' notes, this PDF has got you covered. Download the Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws now and kickstart your journey towards success in the B Com exam.

Importance of Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws

The importance of Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws cannot be overstated, especially for B Com aspirants. This document holds the key to success in the B Com exam. It offers a detailed understanding of the concept, providing invaluable insights into the topic. By knowing the concepts well in advance, students can plan their preparation effectively. Utilize this indispensable guide for a well-rounded preparation and achieve your desired results.

Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws Notes

Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws Notes offer in-depth insights into the specific topic to help you master it with ease. This comprehensive document covers all aspects related to Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws. It includes detailed information about the exam syllabus, recommended books, and study materials for a well-rounded preparation. Practice papers and question papers enable you to assess your progress effectively. Additionally, the paper analysis provides valuable tips for tackling the exam strategically. Access to Toppers' notes gives you an edge in understanding complex concepts. Whether you're a beginner or aiming for advanced proficiency, Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws Notes on EduRev are your ultimate resource for success.

Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws B Com Questions

The "Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws B Com Questions" guide is a valuable resource for all aspiring students preparing for the B Com exam. It focuses on providing a wide range of practice questions to help students gauge their understanding of the exam topics. These questions cover the entire syllabus, ensuring comprehensive preparation. The guide includes previous years' question papers for students to familiarize themselves with the exam's format and difficulty level. Additionally, it offers subject-specific question banks, allowing students to focus on weak areas and improve their performance.

Study Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws on the App

Students of B Com can study Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws alongwith tests & analysis from the EduRev app, which will help them while preparing for their exam. Apart from the Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws, students can also utilize the EduRev App for other study materials such as previous year question papers, syllabus, important questions, etc. The EduRev App will make your learning easier as you can access it from anywhere you want. The content of Methods of Computing Value Added Tax (VAT) - Indirect Tax Laws is prepared as per the latest B Com syllabus.
© EduRev
Education Revolution
Signup to see your scores go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup