Know About Vat:  VAT or Value Added Tax is a form of consumption tax which is applicable to taxable supplies which includes goods and services. VAT comes under the category of sales tax and is similar to a retail sales tax except the feature that it is collected in small bits at each stage of progress in production. It helps in gaining a bulk revenue without affecting the major economic elements of a business like, savings or investments.

VAT is a form of tax which is ultimately paid by the customer rather than individual businesses. Customers make the VAT payment while undergoing the procedure of purchasing the goods and services from the business.

The sole difference between a common sales tax and VAT is that the tax liability of VAT is split into different stages, whereas, a sales tax appears only at one stage of business transaction from manufacturer to retailer.

Most authorities and corporate sectors favor VAT because of the easy accessibility it induces over the tax liability of a firm, with the help of credit method. It can also be said that VAT helps in avoiding or eliminating the cost cascading effect. VAT is also favorable for conduction export businesses. While the conventional sales tax method results in tax compounding, application of VAT helps to avoid that.

Why is Vat so important?

• • • VAT has so many salient features that makes it so valid to be included for the proper conduct of a business.
    • VAT helps in the reduction of tax evasion to a great extent.
    • Moreover, VAT plays an important role in the GDP of a country. VAT also helps in avoiding cost cascading.
    • Uniformity is another relevant feature of VAT. Although certain goods and commodities are exempted from VAT, most commodities are charged a common tax under VAT, so that the same goods purchased from anywhere in a country bears the same rate across that country.
    • No concessions are given to new industries under VAT. Every company and industries are treated fairly and equally under VAT.
    • VAT is a form of non-additive tax,although it is collected at each stage of production. It is like, the tax levied at each stage will be collected at the last retail stage.

Pros of Vat 

• • • It can be said as one of the major sources of revenue as it is transparent in nature. The basis of VAT is the Value added at each stage and not the total price. So there is no chance for increase in price, under VAT.
    • VAT helps in eliminating the complications of the whole tax system since it can bring in more revenue and is comparatively more efficient.
    • VAT can also be said as a government opportunity to improve the GDP sector of a country by bringing back all the persons and entities who were exempted from tax payment.
    • VAT is also capable of eliminating the problem of loss of online sales taxes, since VAT is imposed on all kinds of sales including online sales.
    • By implying VAT taxation, another major advantage is that the discretion can be reduced, as every person and every business is treated alike. No discretion shall be applicable in case of imposition of penalty and late/non-filing of returns.
    • VAT also encourages computerization of taxation which can be useful in tracing the tax evasion done by business with ease. This computerization makes it a part of the management information system and helps the tax department to be more capable and efficient.
    • VAT helps in conducting cheaper exports for international business since the VAT is refunded for export businesses.
    • Moreover, VAT tax is neutral in nature as it never distinguishes between labor intensive industries and capital intensive industries.

Advantages of vat in uae:

• • • One of the major advantages of VAT is that, helps in boosting up personal savings and investments as the tax is not collected in a bulk amount under VAT.
    • VAT registration helps in smooth running of a business and also helps in improving the easiness in every business dealings.

Applying for vat registration in uae: 

Any firm with a turnover of more than DH375,000 per annum must have VAT registration in UAE as per mandated by the Federal Tax Authority of UAE.

Regulated tax agents have been arranged by the tax authority for the facilitation of tax registration for any business. Deadlines will be announced beforehand by the FTA  and any failure in submission of application might result in major penalties and fines.It is mandatory for every business to know about the
VAT regulations and its importance.

The major details required to fulfilling the VAT application: 

• Name of the business
• Banking Details
• Contact Details
• Business Relationships
• Declaration of annual taxable supplies.