OBJECTIVE QUESTIONS ON VAT

VALUED ADDED TAX

1. Tax is levied under VAT at:
a) Last stage of sale b) Multi Stage c) First stage of sale d) First and last stage of sale

2. State whether true or false:
a) lnput credit under VAT is available on account of Central Sales Tax paid on the purchases
b) Input credit is available on account of import duty paid on goods purchased from a country out side India
c) Input credit is payable on account of VAT paid on capital goods
d) Input credit is available only if the purchaser has obtained proper tax in voice
e) VAT avoids cascading effect
f) Vat is easy to administer and transparent

3. VAT is calculated by deducting tax credit from tax collected¬
a) during the payment period
b) during the financial year
c) during any period

Answers to multiple choice questions
1. (B) 2. (B) (F) 2. (D) (T) 2. (F) (T)
2. (A) (F) 2. (C) (T) 2. (E) (T) 3. (A)

PRACTICAL PROBLEMS
Problem No.1: Compute the invoice value to be charged and amount of tax payable under VAT by a dealer who had purchased goods for Rs. 1,20,0000 and after adding for expenses of Rs.10,000 and of profit Rs. 15,000 had sold out the same.
The rate of VAT on purchases and sales is 12.5%.
Invoice value to be charged

Purchase price of goods
Add: Expenses
Add: Profit margin
Amount to be billed
Add: VAT @ 12.5%
Total invoice value 1,20,000
10,000
15,000
1,45,000
18,125
1,63,125
VAT to be paid

VAT charged in the invoice
Less: VAT credit on input 12.5% of Rs. 1,20,000
Balance VAT payable 18,125
15,000
3,125

Problem No.2: Manufacturer A sold product X to B of Delhi @ Rs. 1000 per unit. He has charged CST @ 4% on the said product and paid Rs. 60 as freight.
B of Delhi sold goods to C of Delhi @ Rs. 1250 per unit and charged VAT @ 12.5%.
C of Delhi sold goods to D, a consumer @ Rs. 1500 per unit and charged VAT @ 12.5%

B Liability of VAT Rs.
Cost of product X purchased from Mumbai
Rs. 1000 + 40 (CST) + Rs. 60
(Credit of CST shall not be allowed under VAT)
Sale price
VAT payable
1,100

1,250
156.25
C Liability of VAT Rs.
Purchase price exclusive of VAT
VAT credit to be taken
Sale price
VAT payable @ 12.5%
VAT credit allowed
Net VAT payable 1,250
156.25
1,500
187.50
156.25
31.25