India gets VAT

It's a good tax. Income tax discourage people from earning, VAT taxes them only when they splash out on non-essentials.

But its applied to services? I was thinking more from a business point of view. Additional paperwork for mostly little reward - and if your business is a service then you are forced to either be charging less (less+vat) to compete with non vat registered people, or to price yourself out of the market?

If your customers are not VAT registered then, yes, you are at a disadvantage if you are VAT registered.

Conversely if your customers *are* VAT registered then you are at a disadvantage if you are *not* VAT registered. Your customers won't care if you charge them VAT and you'll be able to recover VAT on your purchases.

So maybe you want to look at the customers you are targetting, perhaps run two parallel businesses: a VAT registered Limited Company to deal with business customers, a non-registered Sole Trader to deal with the public.

...depending of course on what the rules are in India!

AIUI most business is very pro-VAT in India as it is part of a large-scale tax reform and simplification. The main opposition is from small traders.

Thom

I think I don't get what the purpose of it is... the government makes a net gain in tax, accountants get more work, and the end user fails to benefit?

Are you allowed to do that in the UK? "parallel" businesses being taxed differently? Wouldn't one be seen to be the same as the other uless they're substantially different (and VAT being the only difference?)

Yes and no. You structure the thing so that VAT is *not* the only difference, you find all kinds of very good arguments why the businesses should be separate. If you do it properly yes you can "split" your business for VAT purposes.

This has worked:

Husband runs VATable pub, wife runs non-registered food operation inside the pub. Hairdressers run independant businesses in same salon.

This didn't:

Hotel Group Ltd split into 366 companies (Hotel Group Jan 1 Ltd to Hotel Group Dec 31 Ltd) each trading one day a week LOL!