SYNOPSIS

Value Added Tax (VAT) is now the most common form of consumption tax system used
around the world.

With a view to making the tax structure simple and more transparent, the Government
of India, Ministry of Finance, constituted an Empowered Committee of State Finance
Ministers. The design of State level Value Added Tax (VAT) has been worked out by the
Empowered Committee through several rounds of discussion. The Committee decided to
implement VAT system with a common basic design.

The benefits aimed by the implementation of VAT included, inter-alia, eliminating the
cascading effect by giving a set off for input tax as well as tax paid on previous purchase,
abolishing other taxes such as turnover tax and surcharge, the overall tax burdens were to
be rationalized and there would be self assessment by dealers.

As VAT is a State subject, the States were given freedom for making appropriate
variations in their State level laws.

At the time of formation of Chhattisgarh State, the state has adopted the Madhya
Pradesh Commercial Tax Act, 1994 by changing the name as Chhattisgarh Commercial Tax
Act, 1994 (CGCT Act). The Government of Chhattisgarh repealed the CG Commercial Tax
Act, 1994 and enacted the Chhattisgarh Value Added Tax Act (CGVAT Act), 2005 for
implementation with effect from 1st April 2006.

The public sector of the country has got a significant contribution to the development of
Indian economy. Steel Authority of India Limited (SAIL) is the leading steel-making company
in India. Bhilai Steel Plant is one of the major Industry of Chhattisgarh State. It is flagship unit
of Steel Authority of India Limited and manufacture of various Iron & Steel products. Bhilai
Steel Plant contributes handsome amount in exchequer of state government since inception.
During the year 2010-11 Bhilai Steel Plant has contributed to State exchequer an amount of
Rs. 648.30 Crores towards Value Added Tax as against of total State receipts of Value
Added Tax amounting to Rs. 4524.14 Crores. As such Bhilai Steel Plant contributes
approximately 15% of total State receipts on account of Commercial Tax / Value Added Tax.

This analysis covers VAT implemented in different countries and Indian States.
Although the principles of the tax are broadly the same everywhere, the rules are enacted
and implemented differently in different countries and Indian states and this resulted the
compliance burden on business varies considerably.
The purpose of this study is to provide data to help inform current tax policy and tax

reform in the Chhattisgarh State in comparison to earlier Sales Tax Law. The study

results enable governments to compare their tax systems on a like-for-like basis against

relevant peer states.

1
The wealth of data available on VAT in this study will enables a comparison on how

this tax is implemented and administered and effect on the revenue of the government

and effect on the major industry in the State. The study also suggests the way following

which State Government can improve the practices followed in collection of tax and in

turn improve in the tax collection.

2
 INDEX

SR.NO. TITLE PAGE

NO.
1
1 SYNOPSIS
3
2 INTRODUCTION
6
3 RESEARCH METHODOLOGY
7
4 TYPE OF RESEARCH
8
5 RESEARCH OBJECTIVES
9
6 HYPOTHESIS STATEMENT
10
7 SORCES OF DATA
11
8 RESEARCH INSTRUMENT
12
9 SAMPLE DESIGN
13
10 DATA PRESENTATION, FINDINGS AND INTERPRETATION
15
11 SWOT ANALYSIS
19
12 CONCLUSION AND RECOMMENDATIONS

20
13 CONTRIBUTIONS AND LIMITATIONS OF THE STUDY
26
14 ANEXTURE
27
15 BIBIOGRAPHY
30
16 GLOSSARY
 INTRODUCTION

India has witnessed substantial reforms in Indirect taxes over the past two decades and is

on the verge of another major reform initiative which will bring this process to a

culmination. As a Progressive and welfare oriented Country India should balance the

requirements of direct and indirect taxes in a fair manner. Therefore too much dependence

on direct taxes will be repressive but at the same time passing a heavy burden to the

general public by way of indirect taxes and will constitute hardships to the common

citizen. The objective of this study is to find out the impact of tax systems on the

profitability of the organization and growth of the revenue in India and the state of

Maharashtra. The past experience in Maharashtra and elsewhere have shown that half

baked reforms in the name of VAT have done more harm than good in evolving a tax

system required for a competitive environment. It is important to assess how this scenario

changes from Sales tax to VAT and VAT to GST.

Sales Tax:

Sales Tax in India is that form of tax which is imposed by the government on

sale/purchase of a particular commodity within the country. It is imposed under

mCentral Government (Central Sales Tax) and the State Government (Sales Tax)

Legislation. Normally, each state has its own sales tax act and levies the tax at various

rates. Apart from sales tax, certain states also impose extra charges such as works

contracts tax, turnover tax and purchaser tax. Thus, sales tax plays a major role in

acting as a major generator of revenue for the various State Governments.

3
 Sales tax is levied on the sale of a commodity which is produced or imported and sold

for the first time. If the product is sold subsequently without being processed further, it

is exempt from sales tax. Under the sales tax which is an indirect form of tax, it is the

responsibility of seller of the commodity to collect or recover the tax from the

purchaser. Generally, the sale of imported items as well as sale by way of export is not

included in the range of commodities that require payment of sales tax. Moreover,

luxury items (such as cosmetics) are levied higher sales tax rates. The Central Sales

Tax (CST) Act that comes under the direction of Central Government takes into

consideration all the interstate sales of commodities.

Value Added Tax:

VAT is a multi-point sales tax with set-off for tax paid on purchases. It is collected in

installments at each transaction stage in the production distribution system. It does not

have cascading effect due to the system of distribution or credit mechanism. VAT is a

tax on consumption. The final and total burden of the tax is fully and exclusively borne

by the domestic consumer of goods and services. Value added tax is, therefore a multi-

stage sales tax levied as a proportion of value added. In simple terms, VAT is tax on

sale of commodity at every point in the series of sales by business firms which

the provision of set-off tax already paid on inputs as well as on previous purchases.

Unlike a retailer sales tax or the present sales tax or the present tax scheme, which are

essentially single point taxes, VAT is charged and collected at each stage of the

production/delivery of goods and services.

4
Goods and Service Tax:

Introduction of Goods and Services Tax (GST) in India is a certainty and its impact on

the retail sector is equally crucial to examine. It is believed that traders, including

retailers, would be one of the biggest beneficiaries of this harmonized system of

taxation. Although retail sector has succeeded in evolving as an organized revenue

generating sector, it still continues to be fraught with some inherent challenges posed

by the current indirect tax regime.

5
 RESEARCH METHODOLOGY OF THE STUDY

Value Added Tax is one of the most radical reforms that have been proposed for the

Indian economy after years of political and economic debate. Revenue growth is the

most important aspect by which to judge the success of VAT in India in general and

Maharashtra in particular. The idea to carry out this research study is to measure the

impact of sales tax value added tax and goods and service tax on profitability of

organizations in India. The present study is partly descriptive and partly explorative.

The data for this study is obtained from secondary sources as well as primary sources.

6
 TYPE OF RESEARCH

Present research study is based on primary as well as secondary data. With the

help of following techniques, the primary data of 100 industries was collected:

a) Personal Interviews Methods.

b) Telephonic Interviews.

c) Questionnaires.

d) Case Studies, etc.

7
 RESEARCH OBJECTIVES

1) To understand the key issues involved in the successful implementation of VAT

and GST.

2) To study the impact of Sales tax, VAT and GST on the profitability of

manufacturing industry.

3) To identify the drivers for the smooth implementation of tax from VAT to GST.

4) To Study the Impact of Sales tax, VAT and GST on the price of the product.

5) To Study the impact of Sales tax, VAT and GST on Government Revenue.

8
 HYPOTHYSIS

Through this study we will be able to assess the following aspects:

1. The implementation of Value Added Tax plays an important role on economy of

state.
2. The Value Added Tax is simplify tax structure, created uniform common market
within the country which is bring down prices and that would enable the producers
of goods to reduce costs, face competition from abroad and to increase exports.
3. The Value Added Tax less affects the other taxes like Cenvat under Excise Act,

Income Tax, Octroi, Terminal Tax, Entry Tax etc in comparison to commercial tax.
4. VAT is not burden to the manufacturer and it facilitates concession to

manufacturer in an easier manner.

5. In comparison to Commercial Tax Act, Value added tax system has built-in self-

assessment by the dealers and auditing as such the tax structure becomes simple
and more transparent. This improves tax compliance.

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 SOURCES OF DATA :-
A) Primary Data:

Data on total sales and Sales tax/VAT is collected primarily from various

organizations in India, and Maharashtra as well. Primary data of 100 Industries have

been collected through, Observation method, Personal interviews, telephonic

interviews, discussion with experts, Questionnaire and schedule, Case Studies etc. Data

of all the industries were grouped into five major categories, such as infrastructure

industries, capital goods industries, pharmaceutical industries, consumer goods

industries and chemical industries. The present study is based on time series data for

eight years during 2000-01 to 2008-09.

B) Secondary Data:

Secondary data were collected from referred books, reports, and conference

papers, referred journals, magazines/periodicals, ministry of finance (Economic

Survey) Govt. of India and, Govt. of Maharashtra, Publication of Reserve Bank of

India. In the present study, following statistical tools were used for analysis of data,

simple tabular and percentage method is applied and estimation of annual compound

growth rate and coefficient of variation of total sales and sales tax /VAT for each

organization, state and the country as a whole has been made by using growth rate

formula. Moreover standard statistical package like SPSS is used to calculate the linear

regression and t test to test the hypothesis of the research study.

10
 RESEARCH INSTRUMENT

The questionnaires were designed to collect the information about their Sales and

Sales tax Paid by them after considering the input tax credit from 2001-02 to 2008-09.

The secondary data was collected through Referred journals books, reports, and

conference papers, Referred journals, magazines/periodicals, Publication of Reserve

Bank of India, Ministry of Finance (Economic Survey) Govt. of India and, Govt. of

Maharashtra. Centre of Monitoring Indian Economy (CMIE). Detailed discussion

were held with the knowledgeable personnel who are associated with Indirect Tax

Fields and also with various Tax Consultants, Financial officers of various

Companies.

11
 SAMPLE SIZE OF THE STUDY:

There are a large number of industries in India and particular in Maharashtra. For our

studies we have taken 100 Industries and grouped them in five different types of Major

Industries. The primary data was obtained from the sample respondents who are

associated with manufacturing activity. Field survey covered the hundred industries,

grouped into five major categories. Which are as follows?

1) Capital Goods Industries – 18 Industries

2) Consumer Goods Industries – 24 Industries

3) Infrastructure Industries – 10 Industries

4) Chemical Industries – 23 Industries

5) Pharmaceutical Industries- 25 Industries

For our analysis we have further classified industries on the basis of turnover

into small, medium and large industries. Small Industries includes Industries whose

average sales turnover from 2001-02 to 2008-09 is less than two hundred crores.

Medium Industries are those whose average sales turnover during 2001-02 to 2008-09

is more than two hundred crores and less than one thousand crores and large

industries are consists of industries whose average turnover during 2001-02 to 2008-09

is more than one thousand crores.

12
 DATA PRESENTATION,FINDINGS AND INTERPRETATION :

Present research study is based on primary as well as secondary data. With the

help of following techniques, the primary data of 100 industries was collected:

a) Personal Interviews Methods.

b) Telephonic Interviews.

c) Questionnaires.

d) Case Studies, etc.

The questionnaires were designed to collect the information about their Sales and

Sales tax Paid by them after considering the input tax credit from 2001-02 to 2008-09.

The secondary data was collected through Referred journals books, reports, and

conference papers, Referred journals, magazines/periodicals, Publication of Reserve

Bank of India, Ministry of Finance (Economic Survey) Govt. of India and, Govt. of

Maharashtra. Centre of Monitoring Indian Economy (CMIE). Detailed discussion

were held with the knowledgeable personnel who are associated with Indirect Tax

Fields and also with various Tax Consultants, Financial officers of various Companies.

FINDING :

1. Reforming the tax system is necessary to achieve fiscal consolidation, minimize

distortions in the economy. The way of tax reforms across the world began in the mid

1980s. Many developing countries used tax policy as the principal instrument to

correct fiscal imbalances. The Indian tax system reforms are unique in some respects.

Unlike most developing countries Indian reforms have borne the domestic brand

13
largely in response to changes in the development strategy over time while keeping in

the tune with institutional arrangements in the country (Rao M G, 2005). The Indian

tax reform experience can provide useful lessons for many countries due to the

largeness of the country with multi level fiscal frame work, uniqueness of the reform

experience and difficulties in calibrating reforms due to institutional constraints.

2. The choice of VAT, the design, the rates and the type varies from country to country.

Some countries use the value - added technique for sales taxes. These taxes are

restricted to the manufacturing industries. Indonesia imposes a tax using the value

added technique on manufacturers and importers; on firms that act as the main

distributor.

3. To tackle with the foregoing weakness of the sales tax system, experts have

suggested introduction of VAT. Various states have studied the impact of present

taxation system and have felt the need for a major reform to the existing system. It has

been felt that introduction of VAT creates a level playing field to industries and a VAT

scenario addresses the challenges of globalization for replacing the archaic system of

sales tax in revenue generation. Countries which have introduced VAT have felt that

the economic efficiency concern can be better addressed in a VAT regime. It has also

been experienced by governments, the world over, that VAT improves compliance

levels and reduces evasion of tax by virtue of its self-policing effect.

14
 STATISTICAL METHODS/TECHNIQUES USED:

Appropriate Statistical tools necessary to measure the profitability and growth of the

organizations vis-à-vis revenue scenario of the state has been incorporated. The study

uses the standard Statistical Package for Social Sciences (SPSS) for the analysis.

SWOT ANALYSIS

Value Added Tax is a tax on the value added at each stage of production and

distribution process and can be aptly defined as one of the ideal forms of consumption

taxation since the value added by a firm represents the difference between its receipts

and cost of purchased inputs.

I ) Single Point Taxation Systems:

In this, a commodity is taxed only at one point of time in the State. This system is

introduced in order to simplify the taxation system. Based on the stage at which it is

taxed it can be further classified into, into three categories:

a) 1st Point Taxation System:

b) Last Point Taxation System:

c) Taxing any Intermediate Point of Sale:

II) Multi Point Taxation System:

In contrast to single point taxation system, in multipoint taxation system a commodity

is subjected to tax at every point of sale. No deduction is allowed as resale.

VAT is the perfect example of a multi point taxation system. One of the objects of

15
introduction of VAT is to increase the revenue of the State. In effect it is similar to last

point of tax in single point tax system, however it has got certain advantages over the

last point of tax system is concerned, from tax compliance point of view.

Single Point Taxation System V/s. Multi Point Tax System-(merits and demerits):

Advantages of Single Point over Multi Point taxation System;

• Single point tax system is very easy to comprehend as compared to multiple point tax

system. There is less calculation for set-off. In a country like India where illiteracy rate

is at the highest, implementation of multi point tax system is very difficult.

• Multi point taxation system adds complexity in record keeping and increases cost of

compliance. Elaborate records of purchase and sales are required to be kept in order to

claim set-off.

• In a single point taxation system very few dealers are required to pay tax and they

comprise of generally big dealers having goods infrastructure facilities. While in multi

point tax system even small dealers are required to pay tax, who have hardly got any

necessary infrastructure.

Advantages of Multi Point over Single Point System:

• Multi point taxation system enjoys international appeal over single point taxation

systems. All over the world, countries are switching over to multi point taxation

system.

• Multi tax system eliminates pyramiding effect as there is no retention money and

full set-off is granted.

• Multi tax system is self-regulatory as it creates incentives for compliance. Since

16
incidence of tax on individual dealer is very negligible, especially after considering

incentive in the form of set-off ,at the same time the base of tax payer is very broad

which make less likely to evade tax. In a single point tax system taxpayer base is

comparatively very small and incidence of tax is very high and there is comparatively

very small and incidence of tax is very high and there is hardly any incentives in the

form of set-off , which make more prone to tax evasion

Hybrid System:

There could be a hybrid system having characteristics of both single point tax system as

well as multi point tax system. For example certain commodities may be taxed at An

certain rate at the first level. Therefore on a second stage it may be taxed again with the

lesser rate of tax. In old Bombay Sales Tax Act, there was sales tax and general sales

tax. Now also, in many states, there is a concept of resale tax/turnover tax which is the

example of such hybrid tax. The only it differs with VAT is that there is no set-off

available for resale tax/turnover tax paid.

VALUE ADDED TAX :

In 1954, the value added tax system was initiated by the then joint director of the tax

authority of France, Maurice Laure. VAT came into effect for the first time on 10th

April, 1954. From its inception, the value added tax system was imposed on all major

sectors of France – the first country to use this system. Once instituted, it was

Immediately clear that revenues collected from the VAT system constituted a

substantial share of the government’s revenue in the French economy. Not surprisingly,

17
due to the ease of payment and ready comprehensibility, the value added tax system

has been adopted by different nations across the world. VAT is intended to be levied –

or charged – whenever there is some value addition to raw material. The taxpayers on

the other hand, will get credit for the amount of tax paid off at the stages of

procurement. The value added tax system has proven to be effective in avoiding

problems that normally might arise out of the double taxation of goods and services.

The value added tax system is designed to address various problems associated with the

conventional sales tax system. In sales tax, there is no provision for input tax credit,

which means that the end consumer may pay tax on an input that has already been

taxed previously. This is known as cascading and leads to increases the consumer tax

and price levels, which increases the rate of evasion and can be detrimental to

economic growth. The value added tax system deals with these problems quite

efficiently. As VAT is imposed on value addition – at every single stage – there is no

incidence of cascading. In this way, the final consumers bear the burden of paying

value added tax. This system involves absolute transparency at every stage of taxation,

thereby making the tax system quite comprehensible and simple. In some countries like

India, the system of VAT has been designed to change the existing system of sales

taxation. Value added tax is different from the conventional system of sales tax,

because VAT is charged at every stage of value addition – whereas sales tax is imposed

on final value of transaction only.

The value added tax system allows for input tax credit, or ITC, on the amount of tax .

18
 CONCLUSION :

One can conclude, based on the aforementioned arguments, that, in spite of its

complexity, the VAT is a better way to tax consumption than the other tax. However, it

must be highlighted that some precautions must be taken, e.g., adopt simplified

procedures for refunding, avoid the use of different tax rates, limit exemptions, etc.

Otherwise, the VAT may lose its efficiency due to complexity.

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 CONTRIBUTION AND LIMITATION OF THE STUDY

a. Rate of Tax VAT proposes to impose two types of rate of tax mainly:

 4% on declared goods or the goods commonly used.

 10-12% on goods called Revenue Neutral Rates (RNR). There would be no fall

in such remaining goods.

Two special rates will be imposed-- 1% on silver or gold and 20% on liquor. Tax on

petrol, diesel or aviation turbine fuel are proposed to be kept out from the VAT system

as they would be continued to be taxed, as presently applicable by the CST Act.

b. Uniform Rates in the VAT system, certain commodities are exempted from tax.

The taxable commodities are listed in the respective schedule with the rates. VAT

proposes to keep these rates uniform in all the states so the goods sold or purchased

across the country would suffer the same tax rate. Discretion has been given to the

states when it comes to finalizing the RNR along with the restrictions. This rate must

not be less than 10%. This will ensure By doing this that there will be level playing

fields to avoid the trade diversion in connection with the different states, particularly in

neighbouring states.

c. No concession to new industries Tax Concessions to new industries is done away

with in the new VAT system. This was done as it creates discrepancy in investment

decision. Under the new VAT system, the tax would be fair and equitable to all.

d. Adjustment of the tax paid on the goods purchased from the tax payable on the

20
goods of sale All the tax, paid on the goods purchased within the state, would be

adjusted against the tax, payable on the sale, whether within the state or in the course of

interstate. In case of export, the tax, paid on purchase outside India, would be refunded.

e. Collection of tax by seller/dealer at each stage. The seller/dealer would collect the

tax on the full price of the goods sold and shows separately in the sell invoice issued by

him.

f. VAT is not cascading or additive though the tax on the goods sold is collected at each

stage, it is not cascading or additive because the net effect would be as follows as the

tax, previously paid on the sale of goods, would be fully adjusted. It will be like

levying tax on goods, sold in the last state or at retail stage.

ADVANTAGES OF VAT :

1. Simplification Under the CST Act, there are 8 types of tax rates- 1%, 2%, 4%, 8%,

10%, 12%, 20% and 25%. However, under the present VAT system, there would only

be 2 types of taxes 4% on declared goods and 10-12% on RNR. This will eliminate any

disputes that relate to rates of tax and classification of goods as this is the most usual

cause of litigation. It also helps to determine the relevant stage of the tax. This is

necessary as the CST Act stipulates that the tax levies at the first stage or the last stage

differ. Consequently, the question of which stage of tax it falls under becomes another

reason for litigation. Under the VAT system, tax would be levied at each stage of the

goods of sale or purchase.

2. Adjustment of tax paid on purchased goods under the present system, the tax paid on

21
the manufactured goods would be adjusted against the tax payable on the manufactured

goods. Such adjustment is conditional as such goods must either be manufactured or

sold. VAT is free from such conditions.

3. Further such adjustment of the purchased goods would depend on the amount of tax

that is payable. VAT would not have such restrictions. CST would not have the

provisions on refund or carry over upon such goods except in case of export goods or

goods, manufactured out of the country or sale to registered dealer. Similarly, on

interstate sale on tax-paid goods, no refund would be admissible.

4. Transparency The tax that is levied at the first stage on the goods or sale or purchase

is not transparent. This is because the amount of tax, which the goods have suffered, is

not known at the subsequent stage. In the VAT system, the amount of tax would be

known at each and every stage of goods of sale or purchase.

5. Fair and Equitable VAT introduces the uniform tax rates across the state so that

unfair advantages cannot be taken while levying the tax.

6. Procedure of simplification Procedures, relating to filing of returns, payment of tax,

furnishing declaration and assessment are simplified under the VAT system so as to

minimize any interface between the tax payer and the tax collector.

7. Minimize the Discretion the VAT system proposes to minimize the discretion with

the assessing officer so that every person is treated alike. For example, there would be

no discretion involved in the imposition of penalty, late filing of returns, non-filing of

returns, late payment of tax or non payment of tax or in case of tax evasion. Such

system would be free from all these harassment.

22
8. Computerization the VAT proposes computerization which would focus on the tax

evaders by generating Exception Report. In a large number of cases, no processing or

scrutiny of returns would be required as it would free the tax compliant dealers from all

the harassment which is so much a part of assessment. The management information

system, which would form a part of integral computerization, would make the tax

department more efficient and responsive.

LIMITATION OF VAT

1) VAT-is-regressive

It is claimed that the tax is regressive, i.e. its burden falls disproportionately on the poor

since the poor are likely to spend more of their income than the relatively rich person.

There is merit in this argument, particularly if it attempts to replace direct or indirect

taxes with steep, progressive rates. However, observation from around the world and

even Guyana has shown that steep tax rates lead to evasion, and in the case of income

tax act as a disincentive to effort. Further, there is now a tendency in most countries to

reduce this progressivity of taxes as has been done in Guyana where a flat rate of

income tax has been introduced. In any case VAT recognized and makes room for

progressivity by applying no or low rates of tax on essential items such as food, clothes

and medicine. In addition it allows for steep rates of tax on luxury items, although this

can create problems for administration and open opportunities for evasion by way of

deliberate misclassification, a problem incidentally not peculiar to VAT, and which

takes place extensively in the area of customs duties.

23
2) VAT is too difficult to operate from the position of both the administration and

business.

It is often argued that VAT places a special burden on tax administration. However, it

is worth noting that wherever VAT was introduced one of its effects was the

rationalization and simplification of the previous indirect tax system and its

administration. Each of the previous indirect taxes such as customs duties, purchase tax

and excise duties replaced by VAT had its own rate structure as well as a different tax

base and separate administrative procedure. The consolidation and incorporation of

numerous indirect taxes into the VAT would simplify the rate structure, tax base, and

administration of the indirect tax system, thereby eliminating the overlapping auditing

practices that had plagued those systems. In addition, the abolition of a number of

alternative indirect taxes releases experienced personnel to focus on a single tax. It also

means reduction in the number of forms used, legislation to be applied and returns and

accounts with which the business person has to contend.

(b)Business :- It is true that the VAT is collected from a larger number of firms than

under any form of income tax or single state sales tax; to the typical smaller firms the

complexities of the tax and the need for more extensive records (for example, to justify

deductions) are likely to prove serious. However, it is often overlooked that businesses

already function with considerable administrative responsibility for a number of laws

including the National Insurance Act and the Income Tax Act. Under the Income Tax

(Accounts and Records) Regulations of 1980 every person, without exception is

required to maintain detailed and extensive records of all its transactions.

24
Compliance with this will certainly ensure compliance with VAT regulations, and since

there is an actual benefit to be derived from accounting for VAT paid on input there is

an incentive for proper record-keeping. As we have noted before, VAT also allows for

the exemption of small businesses from the system. Under any form of sales taxation,

small businesses have to be granted special treatment because of their inability to cope

with the requirements of keeping adequate records which larger enterprises can handle

at a reasonable cost. The intent of the special treatment is to reduce the administrative

burden on small enterprises, but not the taxes that normally would be charged on the

goods and services they supply. The revenue loss at the final link in the commercial

cycle is limited only to the value added at that stage ,whereas in the case of income tax

or sales tax the entire tax is lost. To recover the loss from exemptions, a flat tax on

turnover may be applied. In the larger businesses with proper staff and computers, the

task is really one of double entry book-keeping and any additional work is hardly ever

noticed.

3.-VAT-is-inflationary

Some businessmen seize almost any opportunity to raise prices, and the introduction of

VAT certainly offers such an opportunity. However, temporary price controls, a careful

setting of the rate of VAT and the significance of the taxes they replace should

generally ensure that there is no increase if any in the cost of living. To the extent that

they lead to a reduction in income tax, any price increases may be offset by increases in

take-home pay.

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 ANNEXTURE :

1) Who should file Annual e Return Annexure?

Ans : The dealers who are not eligible to file form 704 audit report as per provisions u/s

61 of MVAT Act, 2002, are required to file Annual e Return Annexure, before filing

Last Return of the Financial Year.

2. What is the due date of filing of Annual e Return Annexure?

Ans : Annual e Return annexure should be uploaded before filing of Last Return of the

Financial Year. The Dealers who are not eligible to file form 704 are required to file

last return of the financial year before 30th June. Hence, Annual e Return Annexure

can be uploaded up to 30th June, prior to filing of last e Return of the Financial Year.

The dealers whose Registration Certificate (RC) is cancelled in between the FY ( say w

e f 30.06.2014 ) then such dealers should file Annual e Return Annexure, before filing

of Last e Return i.e Return up to the date of RC cancellation.

3. How should I download Blank Form of Annual e Return Annexure from mahavat

site?

Ans : Please visit website of MSTD – http://www.mahavat.gov.in/ . Select Downloads

and click on Forms. On the Form Page click on Electronic Forms . On the ‘Electronic

Forms’ page, click on the “Annextures(For e-704 not eligible Dealers) V 2.0” link.

Save the downloaded Form on your computer.

26
 BIBIOGRAPHY

Research papers /Professional Journals/ Books/ Articles/website :

1. – (First Indian Print 2005), Pearson

Education (Singapore) Pte.

Ltd.
s
2. & Co.,
Pvt.Ltd TNCTJ‟ S the tamilnadu value added tax act, 2006, Tamil Nadu act No. 32
of 2006 as amended by Tamil Nadu act no.21 of 2007, second edition,
K.T.Nagabhushan Swamy, Naags Publications Chennai, sep.2007.
3. Nagabhushan swamy K.T. (2007), TNCTJS value added tax rates in Tamil Nadu,

Fourth Edition, Naags Publications.

4. Nagabhushan Swamy K.T. (2008), TNCTJS value added tax practice and

procedure in Tamil Nadu, First Edition Nags Publications.

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 12. Deepashree (2007), General Economics For Ca Cpt, Tata McGraw-Hill, New

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Centax Publication.
28
 24. Gupta, Alka (2001), Public Finance and Tax Planning, Anmol Publications PVT.

Ltd., New Delhi, pp.147-148.

25. Gurumurthi, S. (2004), Value Added Tax Across the World, Vikas Publishing

House Pvt.Ltd.,India
26. Isidore, Holaind (2009), Natural Law and Legal Practice: Lectures Delivered at the

Law School of Georgetown University, BiblioLife, Pg. 258.

27. Joseph, R. (2005), Business Policy And Environment,Anmol Publications PVT.

Ltd., New Delhi, p.407-408.

28. Koli, L.N. (2008), Ugc-Net/jrf/slet Commerce ( Paper II), Upkar Prakashan, Agra,
p.20U
29.Krishnan,V. S. (2006), Indirect tax reforms: challenge & response,
Abhinav Publications, New Delhi, p. 153.
30.Kumar, N. and Mittal, R. (2002), Public Finance: Theory and Practice, Anmol
Publications Pvt. Ltd., New Delhi, p. 56-57.
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Finance Fundamentals, Juta & Co. , Cape Town, South Africa, p.32.
30. Mukherjee, Sampat (2002), Economics for C.A. Professional Education Course 1,

New Age International (P) Ltd. Publishers, New Delhi, p. 484.

Mukhopadhaya,Sukumar, Economics of Value Added Tax (Theory & Practice).

29
 GLOSSARY :

The value added tax, abbreviated as VAT, in the European Union (EU) is a general,
broadly based consumption tax assessed on the value added to goods and services. It applies
more or less to all goods and services bought and sold for use or consumption in the EU;
goods sold for export or services sold to customers abroad are normally not subject to
value-added tax. VAT is charged as a percentage of price, meaning that the actual tax
burden is visible at each stage in the production and distribution chain.
EU Directive 2006/112/EC, in effect since 1 January 2007, is the main piece of EU
legislation relating to VAT. It guarantees that the VAT contributed by each Member State
to the Community's own resources can be calculated, while allowing Member States many
possible exceptions and derogations from standard VAT coverage. Because the Directive
only sets a minimum 15% fixed rate until 31 December 2010, rates vary between 15 % and
25 % in Member States. There are also several temporary derogations.
In National Accounts (Regulation 549/2013 ESA 2010 paragraph 4.17), value added type
taxes (code D.211) are defined as taxes on goods or services collected in stages by
enterprises and ultimately charged in full to the final purchaser.

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