VAT International Practices

VAT in India

Value-added taxation in India was introduced as an indirect value added tax (VAT) into the Indian taxation system from 1 April 2005. The existing general sales tax laws were replaced with the Value Added Tax Act (2005) and associated VAT rules.

In India the tax structure is having two components as State level and Central level.VAT tax however is ultimately paid by the end consumer, as dealers are allowed to collect VAT tax on their sales, retain the tax paid on their purchases and only pay the balance to the Government. Unlike service tax, VAT is still governed by the State Government by separate VAT act passed by each of the state in India under the guidelines issued by an Empowered Committee to ensure uniformity. Therefore, the procedure for VAT Registration, the VAT Rates, due date for VAT payment, deadline for VAT Return Filing and other modalities differ from State to State.

But now India is also in edge of a change to GST. The tax model will be a “Dual GST” system. Both, Central Government and the State Governments will levy respective GST concurrently on a common base value. Thus, all goods and services, barring a few exceptions, will be brought into the GST base. Importantly, there will be no distinction between goods and services for the purpose of imposition of tax.

At present the standard rate of 12% is adopted for CENVAT, Service Tax rate of 12%, along with residuary rate of VAT at 12.5% brings the overall rate to 25%-30% in India. But, post GST, it is likely to be in the range of 18%-20%.

GST/HST in Canada

The goods and services tax (GST) is a tax that applies to the supply of most goods and services in Canada. Three provinces (Nova Scotia, New Brunswick, and Newfoundland and Labrador, referred to as the participating provinces) harmonized their provincial sales tax with the GST to create the harmonized sales tax (HST). The HST applies to the same base of taxable goods and services as the GST.

Effective from January 1, 2008, the GST rate was reduced from 6% to 5%, and the HST rate from 14% to 13%.  Almost everyone has to pay GST/HST on purchase of taxable supplies of goods and services (other than zero-rated supplies). Some sales and supplies are exempt from GST/HST. Although the consumer pays the tax, businesses are generally responsible for collecting and remitting it to the government. Businesses that are required to have a GST/HST registration number are called registrants. Registrants collect the GST/HST on most of their sales and pay the GST/HST on most purchases they make to operate their business. They can claim a credit, called an input tax credit (ITC), to recover the GST/HST they paid or owe on the purchases they use in their commercial activities.



Australian GST

In Australia, the GST is a broad-based tax of 10% on most goods and services. In most cases, GST is included in the price which is paid. Only registered business entities are entitled to a tax credit.

The effect of this provision is that consumers are not reimbursed for the GST paid on purchased goods and services.  Most food items, including meat, fruit and vegetables, are GST-free. However, some food and beverages have been included in GST — for example, prepared food, takeaway food, restaurant meals, confectionery, ice cream, snack foods, alcoholic beverages and soft drinks. Other GST-free items include most education and health services, eligible child care, and a range of other goods and services.

GST will not be included in the price of supplies outside the scope of GST. However, if a person is registered for GST purposes, he will be entitled to claim input tax credits for GST included in the price of things acquired for the purpose of making these types of supply.


Indirect Tax in U.K.

In U.K., the indirect tax structure comprises excise duty as well as VAT. However, the scope of excise duty is restricted to limited commodities.  Excise duties are charged on certain goods, such as, motor fuel, alcohol, tobacco, betting and vehicles. Taxable event in case of excise duty is manufacture of goods. Value Added Tax (VAT) is a tax that is charged on most goods and services that VAT-registered businesses provide in the UK. It is also charged on goods and some services that are imported from countries outside the European Union (EU), and brought into the UK from other EU countries.  VAT is charged when a VAT-registered business sells to either another business or to a non-business customer. When VAT-registered businesses buy goods or services, they can generally reclaim the VAT they have paid.

There are three rates of VAT, depending on the goods or services the business provides. The rates are: –

  • Standard – 15 per cent
  • Reduced – 5 per cent
  • Zero – 0 per cent

There are also some goods and services that are: –

  • Exempt from VAT, or
  • Outside the UK VAT system altogether.

VAT is a tax that is charged on most business transactions in the UK.

GST in Singapore

In Singapore, Goods and Services Tax (GST) is a tax on domestic consumption. The tax is paid when money is spent on goods or services, including imports. It is a multi-stage tax which is collected at every stage of the production and distribution chain.  “Output tax” is the GST a registered trader charges on his local supplies of goods and services. The tax is collected by him on behalf of the Comptroller of GST. “Input tax” is the GST that the trader has paid on purchases of goods and services for the purpose of his business. The input tax is deductible from output tax to arrive at the GST payable by the trader, or amount to be refunded to him.

In general, a supply is either taxable or exempt. A taxable supply is one that is standard-rated or zero-rated. Only a standard-rated supply is liable to GST at 7%. Zero-rating a supply means applying GST at 0% for the transaction. A GST registered trader need not charge GST on his zero-rated supplies, but he is, nevertheless, allowed a refund of the tax he has paid on his inputs. In Singapore, only “export” of goods and “international” services are zero-rated. If a supply is exempt from GST, no tax is chargeable on it. A GST registered trader does not charge his customer any GST on his exempt supplies. At the same time, he is not entitled to claim input tax credits for any GST paid on goods and services supplied to him for the purpose of his business. The “sale and lease of residential properties” and “financial services” are exempt from GST in Singapore.

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