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rakhi2rakhi
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Sir,
We can see from your lecture that there are certain advantages of registering for VAT. However I dont understand why would anybody make supplies at standard rated when he (sole trader or company) can claim all input VAT if he is VAT registered and make supplies at zero rate. By doing so the price of the goods to general public will not increase(as 20% VAT would not be added if zero rated) but we can claim all input VAT. What is the benefit of making supplies at standard rate instead of zero rate.Many thanks in advance.
Tax Tutor
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I regret that I am not certain what you are saying in your question above, but if the type of supply that a business makes is classified as zero rated then there will be no output tax to charge on its sales, so the price will not increase, but being VAT registered will allow the business to reclaim the VAT that it incurs on its purchases and expenses, therefore reducing its net cost.
If a business makes standard rated sales then registering for VAT would make its prices 20% higher, BUT if its customers were themselves VAT registered businesses then they would be able to reclaim their input VAT so that it would not change the net cost to the customer. Then the business being VAT registered would as stated above be able to reclaim its own input VAT and thus reduce its own net costs.
rakhi2rakhi
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