Value Added Tax or VAT is a tax to be paid by a merchant or business owner for every point of sell and purchase of goods and service in a particular supply chain. In it, the value addition is identified and accordingly, tax is imposed. There are a production and distribution cycles in a business environment taken care of by the supply chain management team. Here the tax in the form of VAT is imposed only for the consumption of goods and services, not for the production of the same. The process involves identifying the value addition and then accordingly calculating and imposing a tax of certain value. VAT is applicable or used only for a sale that is carried out between states that are known as an interstate transaction.
Advantages of VAT for the Traders
VAT has helped businessman and traders tremendously. It has also helped the government. If there is transparency in business that is in sales of goods and service, it goes in favor of all the elements in the value chain. One of the major qualities of this taxation is that the calculations are made easily and it can be learned with little effort by all those concerned. And not a single detail can be missed out owing to the intervention of software and IT technology. Even the minutest details of the transaction are not spared or overlooked.
In a country, each state has its VAT laws. These laws are directed by a committee which is empowered by the Ministry of Finance. The purpose of these laws and guidelines is to see to it that the taxes are levied with proper implementation of the provisions. It is ensured that a uniform structure of taxation is maintained.
Value Added Tax is placed under the category of indirect tax. This tax is borne by the end-user that is the consumer. But the consumer is indirectly spared the burden of paying a greater amount of tax by reducing the quantum of tax with proper distribution of load along the channel or cycle of VAT.
Importance of VAT
The principle behind the creation and formulation of this taxation system has been to get rid of multiple taxations with its cascading impact. This is what was happening in the realm of Sales tax structure before VAT came into being. The VAT is also helpful to strengthen compliance of law and better collection and utilization of taxes. It also fits into the parlance of global trade because here you cannot afford to have any variance.
VAT Return Filing Period for 2020 in UAE
The VAT return filing period for 2020 is categorized into various segments of monthly and quarterly units of filing of returns.
A taxable entity with an annual supply of a particular amount will be assigned a quarterly period of taxation. If the amount exceeds the threshold, the person will be taxed in a monthly fashion.
Specifications for Filing VAT Returns Online 2020
If the turnover of the manufacturer or seller exceeds the thresh hold limit, they are supposed to register for value-added tax. They have to file VAT returns. Every trader, manufacturer or seller must get the registration done once the stipulated limit is crossed.
The process of registration includes getting the TIN before filing for return online. A tax code is issued, having an 11 digit number. It is issued by a concerned tax department. After an enterprise gets the registration done, it is given a user ID and a password from the commercial tax department.
GCC Filings provides professional services in company formation in the UAE, accounting, auditing with tax auditing services. It can be contacted for VAT registration and to know how to apply for VAT in the UAE.