VAT IN UAE
VAT IN UAE
VAT IN UAE Like wise India, which implemented GST i.e Goods And Services Tax in the mid of year 2017. Now UAE is ready to implement VAT i.e Value Added Tax from 01 January 2018.
What is The difference between VAT and GST ?
Apart from name there is no major difference between VAT and GST. Both are indirect tax or we can say GST works upon the VAT principle?
What is VAT? and How it Works?
VAT is an indirect tax levy on VALUE ADDITION of consumable goods or services. For Example trader A sells goods to trader B in DH 1000 and tax rate is 5% the trade price would be
Trader A to B
Goods Cost DH 1000
VATax (5%) DH 50
TOTAL DH 1050
Now If Trader B sells it to Consumer C after adding its margin (ex DH 200) at 1200, the end price payable by consumer:
Purchase Price(Without VAT) DH 1000
Margin(Value Addition) DH 200
Sale Price DH 1200
VATax (5%) DH 60
TOTAL PRICE for C DH 1260
Now Tax Payable BY A to Government DH 50
Tax payable by B to Government (60-50) DH 10
Impact of VAT on UAE
The implementation of value-added tax (VAT) will have the biggest impact on the UAE’s middle class earning around Dh20,000 a month with the highest increase in cost going into buying food items. However government may provide exemption and relief to small sectors.
Will it be similar to GST in India?
The concept, theme and motive seems to be same but VAT in UAE appears to be easier as compared to GST of India.
Tax Rates : No Multiple tax slabs and all taxable services or goods are charged at 5 per cent.
Zero Rated Category: There is a category of zero rate, besides exempt goods and services. Under zero rate category, the business need not pay tax but can claim input credit for the levy paid earlier.
Schools are under zero rate.
VAT IN UAE will boost the economy of UAE however it may impact the middle or lower middle class because of increase in price of consumer goods.