Was the blog on How to Register for VAT in India that we published last month helpful? This month, we follow it up with information on how to calculate the VAT.
In simple words, VAT = Output Tax – Input Tax
Now let’s see how Input and Output Tax are calculated:
Input VAT: Amount paid by a buyer as a percentage of cost price for goods/services used to make a final product
Say the Cost Price of a goods/services is = INR 100
Assuming the VAT rate to be 12.5%,
Input VAT (VAT paid during buying) = INR 12.50
Output VAT: Amount received by a seller as a percentage of the selling price of the final product
Say the Selling Price of the Product is = INR 200
Output Tax (VAT collected during resale) = INR 25
VAT Payable = Output VAT – Input VAT
= INR ( 25 – 12.50) = INR 12.50
VAT is therefore calculated by deducting tax credit from tax collected during the payment period.
• If you are registered for VAT, you are liable to pay VAT only at one stage, when you are selling the product
• You would have paid VAT while purchasing goods from your suppliers. This VAT will not be your cost as you will deduct a corresponding amount from tax on your sales.
You can also find many VAT calculators online, such as www.vatcalconline.com, www.easycalculation.com/finance/vat.php, etc. We would however urge you to check with your accountant before using the afore-mentioned sites
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