VAT in India – All you need to know?
When you first start up, it is easy to get drowned in a pool of legal terms, especially taxes, more so when there are so many of them. Seriously, VAT? Sales tax? Service tax? The list seems to never end. Let’s break it down bit by bit. In this article, we will have a look at what VAT is all about.
So, What Is VAT?
Value Added Tax or VAT is an indirect tax levied on goods and services. It is levied at each stage of production and distribution of the product or service. Also known as Consumption tax, Value added means increase in the value of goods at each of these stages. This multipoint sales tax was introduced in India on April 1, 2005.
In simple words…
- It is an indirect tax levied by the State
- Services and goods that are similar will be taxed uniformly
- Although the Producer is responsible to pay the tax to the government, the consumer pays the actual tax at the time of the sale.
- Easy to implement
- Reduces the cascading effect of sales tax.
When Should You Register for VAT?
VAT registration is required if the annual turnover is more than 5 lakhs per year. At the time of registration, a TIN number is allotted. VAT is governed by the state and therefore VAT rates vary from state to state.
What is the VAT rate in India?
Vat rate differs from state to state and varies from products to products as well. For example, Where Rajasthan levies 1% tax on diamonds; this precious stone is exempt from tax in Gujarat.
To know more about VAT or VAT registration you can visit our website www.startupchoice.com or drop your queries at firstname.lastname@example.org.