BASICS ABOUT TAXES

(a) Indirect Taxes

(b) Direct Taxes

Local Sales Tax:-

Sales tax is collected from manufacturer itself and nobody else like distributor or retailer collects tax.

No sales tax on distributor and retailer, Whole taxes have to be paid by Manufacturer Only

VAT

Haryana Government will receive 18 Rs as Taxes in both the cases

(a) LST:- Whole 18 Rs to be paid by A and No Taxes to be paid by B and C

(b) VAT:- Taxes to be paid on Value Addition

   A will pay 10 Rs

   B Will Pay 15-10 = 5 Rs

   C Will Pay 18-15 = 3 Rs,

ITC (Input Tax Credit)

A  Zero

B 10 Rs

C 15 Rs

LST and CST

Since Goods moved from one state to another Central Govt will receive 10 Rs from A Manufacturer

Haryana Govt will not give any Input Tax Credit since taxes have been deposited with Central Govt.

(a) Haryana Govt will Receive 15 Rs from B

(b) Haryana Govt will Receive 18-15= 3 Rs from C, Since B has sold within the state so input tax credit will be       allowed to C for taxes paid by B.

So in Nutshell

(a) CG will receive 10 Rs as LST

(b) SG will receive 18 Rs from B and C

This 10 Rs taxes paid in interstate transactions for which input tax credit is not allowed is also known as cascading effect on taxes or tax on taxes.

Question 1:-       

Please post answer in comment section on youtube channel.

Link for Youtube Video

https://www.youtube.com/watch?v=neP-i-VYafM&t=57s

Thanks

CA Rahul Gupta

Chairman@carahulgupta.com