Briefly how does VAT in India work?

Question

supposedly VAT was introduced as of 1st April 2005. what is the reimbursement system? (i've never been able to understand it!). Who is entitled to reimbursement and what is the difference between zero-rated VAT and goods and services being exempt from the VAT scheme?

please help, i have to complete a project on this. im 18 years old so please explain accordingly! thanksss

Answer 1

Vat means - Value Added Tax .   The basis system before using vat is Sales tax.  for Example Sales for Rs.10000 and sales tax is Rs.400  you totally billed as 10400. You may pay tax authority Rs.400.  In this system the price of goods increased by tax if the goods manufactured different stages and with different components.  This system affect mainly small enterpernures by way of their products price hike.

In VAT is eliminate the same.    

If you sale the goods no difference from earliest sales system. But you take credit on purchased goods with some conditions.

For Example Sold for Rs.10000 plus tax 400 - Total Rs.10400/=  For this you may purchase  some whare about  Rs.8320 in this goods price is Rs.8000 and Vat Credit Rs.320/ your may pay for tax authority Rupees 80only   (400 tax on Sales less 320 tax from purchase) .