CHAPTER 9

 

VAT concept and its application in GST
  1. Value added is the gross difference between selling price and the purchase price in case of traded goods, and gross difference between selling price of final product and purchase price of inputs in case of manufactured goods.
  2. VAT is also a consumption based tax.
  3. In GST, invoices of supplier and recipient will be matched through a computer network. The recipient can avail input tax credit only if supplier has actually paid tax.
  4. If GST is not payable on supply of goods or services, ITC of GST is obviously not available. Transactions where ITC is not available are termed as ‘exempt transactions’.
  5. Certain supplies of goods and services are ‘zero rated’ i.e GST is not payable on supply but ITC is however available. It is different from exempt transactions, where ITC is not available. Zero rated transactions are a way of granting rebate/refund of input taxes to ensure that the final supply of goods and services is free of all the indirect taxes.
  6. Following transactions are specified as zero rated:
  • Export of goods and services.
  • Supply of goods and services to SEZ.