In simple terms, Value Added Tax (or VAT) is an indirect tax. It is normally levied on the consumption or use of Goods and Services at the point of sale. Therefore, it covers all the type of business transactions and it is the most broad-based tax procedure. In some countries it is also known as Goods and Services Tax or Consumption Tax.
It has already been implemented in more than 180 countries around the world, including all 29 European Union (EU) members, Canada, New Zealand, Australia, Singapore and Malaysia except USA.
VAT is charged at each step of the ‘supply chain’. The registered businesses play the role of tax collector on behalf of the Government and finally, consumers generally bear the VAT cost.
Since it is charged at each step of the transaction, the Government gets it in parts from each business on the value addition ( by way of increase of the value of the Goods / Services) by it. At the end of the supply chain the Government gets the total Tax on the Final Value of the Supply. A business pays the government the tax that it collects from the customers while it may also receive a refund from the government on tax that it has paid to its suppliers. The net result is that tax receipts to government reflect the ‘value add’ throughout the supply chain. To explain how VAT works we have provided a simple, illustrative example below:
- Impact Analysis
- Awareness workshops and Training
- Assisting in preparing for implementation of VAT
- Review, Suggest and Test the ERP system for VAT related changes / updates
- Review of existing and ongoing contracts / orders as well as pending tenders / quotations / offers
- Cash Flow Impact analysis
- Detailed study on Pricing the products and services post VAT environment
- Providing full range of services to small enterprises who don’t have any accounting system or manpower to manage it
- Post implementation review and ensure correctness and compliance
- Preparation and submission of Returns