Differential VAT must be computed on the original tax-exclusive sale price, not by recasting prior collections as tax-inclusive consideration.

Balance VAT arising from the corrected rate on pre-2010 pressure-cooker sales must be calculated on the original sale price, excluding VAT. The analysis states that output tax, sale price, gross turnover and taxable turnover require VAT to be levied on the stated sale price exclusive of tax charged or chargeable. Recasting the original price to treat the gross amount as tax-inclusive would detach the assessment from the original taxable sale price and reduce the differential liability. Calculating total VAT at 12.5% and the balance liability at 8.5% on that original price does not impose VAT on VAT, as the tax base remains the original sale price.

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Issues: Whether the balance VAT payable at 12.5% on pre-2010 sales of pressure cookers must be computed on the original sale price on which 4% VAT was initially collected, or by treating the gross amount inclusive of the earlier VAT as the revised tax-inclusive consideration.

Analysis: Under the definitions of output tax, sale price, gross turnover and taxable turnover, VAT is chargeable on the sale price exclusive of tax charged or chargeable. The earlier 4% VAT had been collected and paid on the stated sale price of Rs.100. Recomputing the sale price as Rs.91 to accommodate the subsequently determined 12.5% rate would disconnect the computation from the original taxable sale price and artificially reduce the differential tax liability. Computing the total 12.5% VAT and the balance 8.5% liability on Rs.100 does not amount to levying VAT on VAT, because the levy remains on the original sale price and not on the tax component.

Conclusion: The balance 8.5% VAT is payable on the original sale price on which the earlier 4% VAT was paid; the tax-inclusive recomputation advanced by the assessee is impermissible.

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