Know-How Exchange : Strategy

hi bansal

i have seen lots of news regarding the implementation of VAT across India replacing the various statewise tax structures prevailing but i am afraid i am fully not conversant with the previous and new VAT structure.

pls provide us details about the previous and new tax structure, i mean, what r the changes, where in the entire distribution process it has been changed, so that we can help you better.

when, in my country, VAT was introduced, it made us charge VAT at every step of the distribution process.

this means the price at which my distributor is purchasing from me(the producer) called the Distrbutor Price includes VAT and i give him a VAT Voucher (they call it Challan in Bangladesh) so that he can show it to the Tax authorities at the time of his submission of tax papers. in fact the producer is paying the VAT on the distributors' behalf.

again when the distributor is selling to the retailers the purchase price (called Trade Price) includes the VAT and the voucher remains with the distributor and he again submits that to the Tax authority, thus paying the VAT on behalf of the retailers

manufacturers include the VAT in the MRP and the retailers sell the product at the mentioned MRP to the consumers. the manufacturer pays the VAT on behalf of the consumers to the Govt. Tax authority.

to implement this we didnt have to change the distribution strategy as such except that we had to realign the margin for the distributors and retailers, so you can say we realigned our pricing strategy.

hope that helps. pls provide us more information on India's VAT system, we will be able to help you more.

cheers!!