VAT returns have to be filed by businesses that have an annual turnover that is Rs.5 lakhs or higher.
NIL VAT Rate
In a lot of states items that are very basic in nature are sold without levying any VAT on them. These items are mostly those sold by the unorganized sector in their most basic or natural form. Examples of this type of items are salt, khadi, condoms etc.
1% VAT Rate
For items which tend to be highly expensive, the percentage of VAT applicable needs to be kept low since otherwise the VAT levied could be too high an amount. For such items, VAT is kept as low as 1%. Gold, silver and other precious stones as well as precious jewelry fall under this category of goods. Most Indian states have fixed VAT for these items at 1% of the amount.
4-5% VAT Rate
A large number of daily consumption goods have been put by several state governments under this category of VAT. So VAT charged on goods like oil, coffee, medicines etc. is around 4-5% for most states in India.
General VAT Rate
General VAT rates apply to goods which cannot be segregated and put under any of the above listed VAT categories. For goods like liquor, cigarettes etc. many governments charge high VAT rates of 12.5% or 14-15%. Also, many state governments follow a general rate of VAT for goods which cannot be categorized to suit the above classification. Such goods are taxed at 12%, 13% or even 15% in different states
VAT return due date and VAT payment due date differs from state to state. VAT returns are mostly due monthly, quarterly or annually
Frequently Asked Question
Does the VAT that I pay as part of any purchase reach the government?
Yes. Respective state governments are responsible for collection of VAT which is then passed on to the central government.
Why does VAT on my television set vary in Uttar Pradesh as compared to that in Karnataka?
VAT is subject to rules and guidelines of the state government and as such may slightly differ from one state to another, even for similar goods and services.
Is VAT levied on certain basic necessities like salt, oil too?
No. Many state governments in India have done away with the concept of VAT for certain necessary goods.
Does VAT enhance the cascading effect in taxation process?
No. Rather it minimizes the chances of cascading effect by levying the required tax amount at each and every stage of production.