案例分析题

(a) KT Ltd manufactures and sells gadgets via the internet. KT Ltd is a value added tax (VAT) general taxpayer. It carried out the following transactions in March 2018.

(1) Purchased raw materials for RMB600,000, excluding VAT of RMB102,000, as shown on the VAT special invoice. 70% of the materials were used in production and 30% remained in stock in the warehouse.

(2) Paid a transportation fee of RMB10,000, excluding VAT of RMB1,100, as shown on the VAT special invoice.

(3) Paid rent to the landlord of RMB25,000, excluding VAT of RMB1,250 as shown on the VAT ordinary invoice issued by the landlord.

(4) Purchased canned food and soft drinks for the staff canteen for RMB8,000, excluding VAT of RMB1,360, as shown on the VAT special invoice.

(5) Purchased new machinery for RMB800,000, excluding VAT of RMB136,000, as shown on the VAT special invoice. It is expected the machinery can be used for a period of five years.

(6) The normal price of gadgets is RMB44 for each piece. KT Ltd offered a promotion campaign where customers can receive a coupon worth RMB5 which can be used against the purchase of each gadget. The coupon cannot be exchanged for cash. In addition, customers who register as KT Club members can receive one gadget free of charge. The above prices are VAT inclusive.

The following table shows the number of gadgets sold to or received free of charge by customers in March 2018:

                                                                                                          No. of gadgets

Sold to customers at normal selling price                                               20,000

Sold to customers with coupons                                                            8,000

Received free of charge by new KT Club members                                  2,000

(7) Sold old machinery and received RMB2,000. No invoice was issued. The machinery was acquired in November 2015 for RMB40,000, with input VAT of RMB6,800 credited in the month of purchase.

Note: You should assume the above are the only transactions with VAT implications.

Required:

(i) Calculate the input value added tax (VAT) credit on items (1) to (5) above. State ‘no VAT credit’ for items which are not eligible for input tax credit.

(ii) Calculate the output VAT on items (6) and (7) above.

(b) Explain the differences in VAT treatment between ‘exempt’ and ‘zero rated’ supplies.