Methods of computing Value added Tax (VAT), Indirect tax laws Video Lecture | Indirect Tax Laws - B Com

value-added tax part four in this part
we are going to discuss the methods of
computation of tax there are three
methods of computation of tax addition
method is go income approach because at
the subtraction method this is also
called product approach method and
invoice method or tax credit method or
voucher method this third method is used
worldwide including India now we will
discuss each method in detail first look
at the addition method in this method we
aggregate all the factors of payment
joby apna payments Kihei manufacturing
during the manufacturing you aggregate
all the factors including profit margin
and then amount attack you pair up tax
rate applied early then let's see this
with the help of it
suppose the factors of production like
salary wages rent
yessuh be melaka aapke factors of
production are Ayaka let's say 1 lakh
rupees we are not considering the raw
material here we are just considering
the value addition value addition may
yes array factors of payment considering
a gear total are a 1 lakh add the profit
margin also suppose during the month you
have paid salary wages rent 1 lakh and
the profit margin is let's say 50,000
this cop total ailing it one lakh fifty
thousand and then just apply the tax
rate on this value addition tax rate
let's assume it is a ten percent so 10
percent of this the liability will be
coming 15 thousand rupees is the tax
liability as you can see raw material is
not considered and whatever is the sale
price this is also not considered only
the factors of payment and the profit
margin is considered and aggregate those
things and
apply the tax it and find the tax now
what are the merits or demerits of this
method normally it is used with the
income variant the addition method
income very Neha playa stress is usually
difficult it is difficult to apply this
method when few goods are exempted from
tax and it does not match the sale and
purchase invoices as we have already
seen raw material gimmickry de una
década the sale price lady deity only
factors of payments or profit margin de
cotta so since there is no matching of
invoices the chances of tax evasion is
very high in this method after this we
will look at the subtraction method it
is also called product approach method
in this method we deduct the total value
of purchases from the total sales value
and just apply the tax rate let's see it
with the example suppose you have
purchased raw material for 1 lakh rupees
this is raw material and after
processing you have sold the sale price
of the final product is 1 lakh 50000 you
are just matching these two sale price
and the purchase price of raw material
the difference is coming 50000 is 50000
per 10 percent apply a guru and this is
coming five thousand rupees so this is
what the method to calculate the tax
subtraction method you just have to
subtract the purchase price of the raw
material from the sale price of the
final product or Jobi value addition
arahat scooper up tax rate applying them
let's see what are the pros and cons of
this method tax is charged on the value
addition at each stage her stage may
have value addition tickling a
difference of sales and purchases and
apply the tax rate and the concept of
tax credit is not applicable here
applicable curing a tax credit because
we are directly
letting their tax on value addition only
not on the actual sale price after this
we will see the invoice method which is
commonly used by all the countries
including India his co-op Tax Credit
method people's acne or voucher method
Bibles of calculation of tax on sales
value of each stage her stage may have
seen well you pay first of all tax
calculator there then he entered exit is
may say take set-off of tech or tax
credit of the tax paid on purchases
purchases case a major update XP katha
vortex up is missing deduct curtain and
finally your differential tax at ahead
you have to pay to the government let's
take it up continuing with the same
example of subtraction method it Smith
or as a calculation Allah Greta first we
will calculate the tax on the sale price
sale price by architects at ahead
fifteen thousand now fifteen thousand
texts bacon operator but you can take
the set off of tax paid at the time of
purchases the purchases after the one
lakh rupees car 10 percent gaze up say
let's say ten thousand rupees after tax
payer at the time of purchase of raw
material so fifteen thousand may say ten
thousand less Vijaya
and finally the amount is coming five
thousand this is the tax payable as you
can see the text amounts a Myra the only
the calculation catch a procedure here
it will be different you have to
calculate the tax first on sale price
then you have to show the preserve the
invoices of purchases and purchase
paraplegia taxpayer invoice preserved
Ratna Peggy or Joe be taxpayer pay
invoices perahera
that you can deduct and finally the
differential tax you have to pay now we
can see the benefits of this method both
invoices are matched as you can see sale
price sale invoice ready a bodega hair
or sat may purchase invoice could be
Dakota
chances of tax evasions are reduced
because of this checking tax evasion sky
chances come method is followed almost
in all the countries including India few
cases tax credit may not be a give a
problem eggie few guesses tax credit may
not be allowed in certain cases corn
consequences I just met X credit allowed
nahi hey this is discussed separately