What is the concept behind VAT on Discounted Pricing?

[Sushubh]

Saw this on Myntra yesterday:



Noticed the same at US Polo showroom in Ambiance Mall.

Because of this VAT charges, Myntra price on this pair of shoe was higher than that of Flipkart. But for marketing purposes, Myntra has a higher discount on shoes than Flipkart. Flipkart does not charge this VAT on their discounted products.

 

[whoru007]

VAT is a system of indirect taxation, which has been introduced in lieu of sales tax. It is the tax paid by the producers, manufacturers, retailers or any other dealer who add value to the goods and that is ultimately passed on to the consumer.
There are lots of scenarios there,

[*]a label says MRP XYZ (inclusive of all taxes) which means VAT and all other taxes are already paid. Easy to go with as whatever price sellers sets nothing to worry.
[*]only MRP (so no taxes paid), then VAT would be on final price (e.g. MRP Rs.5,000 , discount 10% -> Net Price Rs.4,500). VAT is on MRP not Net Price.
[/list]It is important to note that VAT should be applied only once in whole product selling cycle (from manufacturer to customer).
Also VAT % varies in different states.

 

[Sushubh]

I checked the same shoe on Flipkart and Myntra. From what I see Myntra is showing you a fake discount because the actual discount is lesser than what they show in the end.VAT is not charged if you have not applied discount coupon on Myntra. Flipkart of course show same price to everyone. There are no coupon system there.Same with US Polo. The notice at the counter clearly said that VAT would be applied on products that are discounted. Not on products without discounted deals.I am confused because the product's price already include VAT in case of clothing (and shoes). So the discounted price would include the appropriate cut on the applicable tax as well right? Because the discount as well as the price of the product both get cut by X%?

 

[mpaspc]

This is a pure marketing gimmick , but you cannot SUCCESSFULLY sue companies for misleading marketing . When some product say that mrp - 105 this means that total price is 105 and this includes VAT , what they are doing is misleading by mentioning a 30 or 40% discount

 

[ghost]

@chromaniac
You are mixing two things here one is trade discount and other is cash discount
In case of trade discount you are given a price cut in the base value or gross value and the vat is calculated on that price only so less vat as compared to vat on original base price.
but in case of cash discount the seller is giving you a reduction in price after collecting the mrp(purchase price+profit+taxes)

 

[Sushubh]

Myntra appears to be giving me a discount on MRP which includes VAT but charging VAT on the discounted price...
@ghost Myntra and Flipkart are selling the same product. Based on your statement, Myntra is giving me a trade discount and Flipkart is giving me a cash discount?

 

[ghost]

Following rules will govern whether or not an additional VAT will be applicable on the products purchased by you:
Products which are sold at a net discount of 19% or above, VAT is not included in the price and an additional VAT will be collected over and above the discounted price.Products which are sold at Maximum Retail Price or at a net discount less than 19%, VAT is included in the price and no additional VAT will be charged.Net discount is essentially the product price less of product discount and coupon discount, if any.

This is written on thier websites faq section.
Also they are charging you around 8.98% vat .
So basically they are correct.
and you are getting an discount of 35%

 

[Sushubh]

I guess I prefer Flipkart style of discounting.

 

[genie]

But for marketing purposes,...

That's what it is but they have mentioned VAT is applicable. You have to click on CLICK FOR OFFER link to see it

 

[Sushubh]

Yey small print. LOL.