Archive | Elements of Direct and Indirect Taxes

Principles of VAT   As and when VAT is introduced, there will not be any taxes such as sales tax octroi etc. the introduction of VAT will face a rough raise  whether since the  state governments are not willing to give up their rights to live  tax such as sales tax , octroi etc.   [...]

VAT for Indian economy   More than around 60 countries which switched out VAT and neighboring countries like Sri Lanka, and Bangladesh have also introduced VAT and hence the finance minister is very keen to introduce VAT in India so as to bringing about the much awaited tax  reform  in Indian taxation  system .   [...]

Advantages of VAT   The major advantages of VAT will be achievement of simplification in the indirect tax system. The second advantage is easy administration since the dealers and manufactures will be issuing invoices which will be available for cross checking which in tern will reduce the propensity to evade tax. Yet another advantage of [...]

MODVAT (modified value added tax) Introduction                                                                            MODVAT—modified value added tax is a concept in central excise law introduced with effect from 1-3-86 and has gained momentum with more and more industries beginning to avail this facility.   Even though the term MODVAT is not defined in central exercise act 1944 or rules made there [...]

Advantages of MODVAT   The Government Exchequer has benefited after the introduction of MODVAT scheme since there is increase in revenue as more and more manufactures are beginning to pay excise duty so as to make the receivers of such duty paid inputs available MODVAT facility.   The industry also enjoys the advantages of the [...]

 Pitfalls of MODVAT scheme    Under the present system of indirect tax collection there are relaxations in procedural aspect and the MODVAT scheme tops the list. Though the scheme is to enable the manufactures to enjoy the facility after compiling with the prescribed procedure and documentation the actual result is reported misuse by a section [...]

Highlight of CENVAT scheme:   MODVAT credit scheme was introduced in 1986 vide rules 57A to 57U. CENVAT has been introduced w.e.f. 1-4-200 vide set of rules 57AA to 57AK.   Credit of duty paid on input:   The CENVAT scheme is principally based on system granting credit of duty paid on inputs. Under CENVAT [...]

Disadvantages of CENVAT   Computation of exact tax content difficult: It became very difficult to know the real tax content in price of a product as product passes through various stages and tax is levied at each stage.   Varying tax burden Tax burden on any commodity will vary widely depending on the number of [...]

CENVAT (central value added tax)   Background of CENVAT   CENVAT (central value added tax) has its origin in the system of VAT, which is common in western European countries generally any tax related to selling price of product. In modern production technology, raw material passes through various stages and procedures till it reaches the [...]

  Credit will be available of duty paid on (a)   raw materials (excluding some items ) (b)  Material used in relation to manufacture like consumables etc. (c)   packaging materials (d)  paints   Inputs should be used in or in relation to manufacture-CENVAT Credit is available only on inputs used in or in relation to manufacture [...]