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a. VAT is a regressive tax. b. VAT is a progressive tax. c. is based on income. d. None of the above. e. All of the above
VAT is a regressive tax
VAT means Value added Tax, which means you need to pay VAT for any value you added to goods.
for example if a retailer purchase raw material from supplier for 100$ and pay 5% VAT on it and after processing selling this goods at 200$.
so 100$ is value added by retailer hence he/she oblige to pay taxes on 100$ @5% which means 50$.
from process perspective you will pay tax on 200$ @5% to Tax Authority which is 100$ but you can take benefit of VAT which you pay while purchasing raw material which is 100$ @ 5% =50$. Net you need to pay Tax Authority it =100$-50$ = 50$
VAT and Sales Tax both are Indirect Taxes and ultimate burden of these taxes are born by final consumers.
The basic difference between the two is:
VAT is applied at the various stages of production while Sale tax is applied on the total value of the Sales.
For a service industry revenue should be recognised on completion of the service. And hence based on past trends provision in respect of credit memo for current month should be recognised. For Ex - If a total of Rs. 100 approval is received during the month and on the basis of past trend it is seen that 40 % of the customers do not appear for approved sessions, then revenue to the xtent of 60% should be recognised in current month. The same should be actualised in the next month based on actual credit memos
Sales Tax is a Consumption tax imposed by the Government , on the sale of goods and services. A conventional sales tax is levied at the point of sale, collected by the retailer and passed on to the government.
A Value added tax is consumption tax levied on products at every points of sale where value has been added, starting from raw materials and going all the way to final retail purchase by a consumer.
the basic principle about these two is that they are both taxes on consumption however VAT is applied on the value added at every stage of production while sales tax is applied on the gross sales value of commodities.
None of above. Its a tax on goods borne by end consumer
Vat is a regressive tax i.e. a tax charged on the value added at every stage of manufacturing or production i.e. vat is charged at every stage wherein value is added to the goods
VAT is a form of indirect tax that is imposed at different stages of production on goods and services. VAT is levied on the import goods as well and the same rate is maintained as that of the local produce. Most of the European and non-European countries have adopted this system of taxation. The transparent and neutral nature of taxation has prompted VAT to emerge as one of the robust revenue raisers in these countries. Sales tax, as compared to VAT is the percentage of revenue imposed on the retail sale of goods. Unlike VAT, sales tax is levied on the total value of goods and services purchased.
VAT is Indirect tax, and it will calculate on Purchases (Input) & Sales (Output)
Income Tax is Direct Tax, it will calculate in Net Income
