Value Added Tax (VAT)

Presented Master subtitle style Click to edit by: Faisal Ali (BSAF)

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(Benjamin Franklin)
(1706-1790)

In this world nothing can

said to be certain, except death and taxes.

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Contents
Value Added Tax(VAT) History of VAT VAT vs. GST Types of Taxes Effects of VAT in Pakistan
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What is VAT ?
VAT is similar to a Sales Tax. It is a tax on the market value added to a product or material at each stage of its manufacture or distribution, ultimately passed on the consumer.(Maurice Laure)

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History of VAT
Value Added Tax (VAT) is a consumption tax of

up to 25% that is levied on both goods and services in most countries around the world. This system is present in Europe, Japan and Australia and a number of other countries. They also allow a refund of VAT to nonresident and resident persons.

VAT has its origin in European countries (EC).

It was pioneered in France, which introduced a value added type of consumption tax on goods in 1954 that was levied at the 4/29/12 production stage.

Rate of VAT in different countriesFinland Denmark Germany

25.00% 22.00%

19.00% 20.00% 16.00%

France Netherlands Sweden Argentina Iceland Russia Switzerland Indonesia Nigeria Bangladesh
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Ireland 19.60% Portugal 19.00% United 25.00%

Italy 21.00% Spain 20.00%

Kingdom Poland 17.50% 22.00% Canada 21.00% 5.00%Croatia 22.00% India M 24.50% 12.50% exico 15.00% China Uruguay 18.00% 17.00% 22.00% Norway South Africa 14.00% 17.60% 25.00% Kenya Korea 10.00% 18.00% 10.00% Sri 5.00%Nepal 10.00% Lanka 12.50% Egypt Source : Economic Watch 15.00% 15.00%

VAT vs. GST

Similarities:
Both are indirect taxes. Both are value added taxes.

Differences (in case of Pakistan)

Services Zero Rating Exempt list Discretionary Powers
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Difference between VAT & GST (in case of Pakistan)

Tax Rate is a major difference between newly introduced VAT and existing GST :
VAT: Only one tax rate which is 15%. GST: Multiple tax rate such as: 16%,18%,21%

and 25%.

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VAT on Goods
All Goods are taxable, Except following:

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W heat W h e a t F lo u r U n p r o c e s s e d p Waa t e r w id o u t b r a n d e s Sa lt w id o u t b r a nodo k sa,m e w s p a p e r , P B n N D ia p e r f o r a d u A rst if ic ia l p a r t s o f b o d y lt C o n t r a c e p t iv e sP r e c io u s M e t a l o t h e r t h a n a f ir s t s u p p

VAT on services
In VAT services were divided in to two categories
Federal Services Provincial Services

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VAT on Services
Federal Services:
Carriage of Goods or passengers by

railway, sea or air.

Provincial Services:
All services are subjected to provincial sales tax except the following:
Funeral, burial or similar services. Services by religious institutions. Services by an approved non-profit
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organization.

Types of Tax
Direct Tax Indirect Tax Ad valorem Tax Value Added Tax Specific Tax Input Tax Output Tax

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Pakistans 20 years Historyfallen to 18% to 9% of GDP. Revenue has

This ratio is one of the lowest in the world. Non-development expenditures has increased

350% during the present period.

2% rich owns 80% of countrys wealth. A corruption of 500 Billion Rupees/Annum is

only in FBR (Shoukat Tareen)

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VAT calculator (Pakistan)

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E fficiencya Productivity ra tiosof GS nd ra of GS T tios T (R inMillion) s (1 9 -2 0 to 2 0 -1 ) 99 00 09 0 Yea r GD P(MP) Consum ption GS T C-E fficiency Productivity E xpenditure Collection 1 2 3 4 5 6 1 9 -2 0 99 00 3 2 ,1 1 ,8 6 1 3 8 ,0 7 ,1 2 3 16 1 1 ,7 1 2 .5 4 0 2 .3 0 0 2 0 -2 0 00 01 4 0 ,8 3 ,2 9 7 3 9 ,4 6 ,4 1 3 13 6 5 ,5 5 2 .3 9 0 2 .3 4 0 2 0 -2 0 01 02 4 5 ,6 4 ,4 2 5 3 6 ,6 1 ,6 7 5 16 6 6 ,5 1 3 .3 0 0 2 .9 4 0 2 0 -2 0 02 03 4 7 ,6 8 ,8 5 4 4 2 ,6 2 ,0 9 5 15 3 9 ,1 9 3 .3 2 0 2 .7 6 0 2 0 -2 0 03 04 5 4 ,5 0 ,6 0 8 4 4 ,1 9 ,6 7 7 29 6 1 ,1 7 3 .4 1 0 2 .9 5 0 2 0 -2 0 04 05 6 9 ,7 2 ,4 9 8 5 1 ,3 3 ,5 1 6 28 3 3 ,5 7 2 .9 8 0 2 .5 4 0 2 0 -2 0 05 06 7 2 ,2 5 ,6 3 0 6 4 ,5 5 ,5 4 2 24 9 9 ,7 8 3 .0 0 0 2 .8 5 0 2 0 -2 0 06 07 8 7 ,0 7 ,6 3 0 7 3 ,0 7 ,3 9 4 39 9 0 ,3 6 2 .1 8 0 2 .8 3 0 2 0 -2 0 07 08 1 ,2 2 9 0 4 ,7 9 9 1 ,7 1 ,1 3 4 37 3 7 ,4 0 2 .9 5 0 2 .0 3 0 2 0 -2 0 08 09 1 ,7 9 3 2 3 ,3 6 1 ,2 3 8 1 8 ,7 1 41 4 5 ,7 4 2 .0 5 0 2 .2 2 0 2 0 -2 1 09 00 1 ,6 8 2 4 6 ,4 3 1 ,1 7 0 3 2 ,8 9 56 4 1 ,3 8 2 .6 4 0 2 .0 2 0
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Pakistans Experience of VAT

In 1947, when Pakistan attained independence, the sales tax

was a provincial levy covering a limited area of commercial activity. With its conversion to a federal tax in 1951, its scope was extended to imports and domestic sale of goods by manufacturers and licensed wholesalers. The enactment of the Sales Tax Act, 1990 introduced its value added version renamed as General Sales Tax (GST).

The effort mounted by tax administration in Pakistan during

the last fifteen years supported by the extension of tax base to wholesalers and retailers has led to significant improvement in the VAT collection in the country. VAT revenues (domestic plus import stage) jumped significantly during this period. In absolute terms, the collection increased from US$ 806 million only in the early 1990s to US$ 2.67 billion in 2000s. The remarkable 4/29/12 performance of VAT can also be judged from the growth in

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(Jewish Proverb)

Taxes grow without rain.

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Thabkyou

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