How to deal with customer demand for a price reduction by cutting the value-added tax on manufacturing to 13%

Remember last year when the state cut VAT from 17% to 16%, and many friends responded to their customers' requests for a 1% reduction, which seemed reasonable to give customers a 1% drop, but intuitively it was not right to simply cut the price by 1%.
't feel right, it's a little messy, it's got to be a bit of a mess.
many friends in the circle of friends last year, such a picture:
now assume that your purchase cost is 100 yuan, the transaction price is 120 yuan

. If the rate of 17% VAT, your import tax is 100 x 0.17 x 17 yuan, the item tax is 120 x 0.17 x 20.4 yuan, after the actual item deduction, your tax amount is: 20.4-17 x 3.4 yuan. The actual profit is 120-100-3.4 x 16.6 yuan.
if you do not reduce the price for the customer, VAT is 16%, then your import tax is 100 x 0.16 x 16 yuan, the item tax is 120 x 0.16 x 19 .2 yuan, your tax amount is: 19.2-16 x 3.2 yuan, the actual profit is 120-100-3.2 x 16.8 yuan. This means that if you don't cut prices for your customers, the 0.2 yuan tax you pay less will be yours.
if you give the customer a 1% reduction, the transaction price is 120 x (1-1%) x 118.8 yuan. If at the 16% VAT rate, your import tax is 100 x 0.16 x 16 yuan, the item tax is 118.8 x 0.16 x 19 yuan, after the actual item deduction, your tax amount is: 19-16 x 3 yuan. The actual profit is 118.8-100-3 x 15.8 yuan. This was 16.6-15.8 x 0.8 yuan less than the original no-cut and 0.8 yuan, a 4.8% decrease in profit.
't know, it's scary. Doesn't that mean a 1% drop? How did profits fall by 4.8%? What's the problem?
careful salesman should note that if your supplier doesn't give you a price cut at the same time, your profit will lose nearly 5%. Therefore, there is a risk of buying and selling, price reduction needs to be cautious.
And on the morning of March 5th, at the fifth session of the 12th National People's Congress, Li Xiang gave a government work report, which mentioned tax cuts, reducing the current 16 percent tax rate in industries such as manufacturing to 13 percent, and lowering the current 10 percent tax rate in industries such as transportation and construction to 9 percent, keeping the 6 percent rate unchanged.
First of all, the national tax rate reduction, is not the sales price also correspondingly reduced the same percentage, the last time we saw a 1% reduction in value-added tax, the price of goods in the end market did not therefore also reduce by one percentage point, right?" Enterprises that ask suppliers to reduce their prices, first look at your own sales price, have also reduced it?
to do business, environmental change, it will be a challenge to fight. We put aside the competitive power of enterprises, only on the reduction of taxes, the impact on the price of enterprises, to the enterprises that put forward price reduction requirements and enterprises to deal with price reduction requirements, analysis of the impact of a drop in prices on prices.
May be for the middle link of the enterprise, their customers asked for such a price reduction, they were forced to also reduce, but this requirement, first of all, from downstream customers conducted down, this is a result of competition, but also a process of distribution of benefits, this is not the principle of value-added tax caused by the result, so, do business, always want to think of what kind of competitive environment, improve the core competitiveness of the enterprise is the key.
Second, if all upstream and downstream enterprises are consciously re-adjusting the price according to the national tax rate, nor is it a policy to reduce the value-added tax rate of 3%, it will require the upstream supplier to reduce the price by 3%, because the government tax on enterprises is not a 3% reduction in the levy rate (the collection rate and tax rate is not a concept), the value-added tax is essentially a tax on the value-added part of the enterprise, the value-added rate of the enterprise will not be 100%.
Moremore, even if each enterprise transfers the government's reduction to downstream enterprises, the value-added tax of one link is the tax reduction of the value-added part of this link, which can be passed to the downstream part, and the proportion of this part should be the product of the value-added rate and the tax reduction rate of this link. Expressed by the formula: excluding tax price reduction , value-added rate of 3%, including tax price reduction, value-added rate of 3 x / 1.16.
For example: the enterprise's import accounts for 60% of revenue, if the enterprise's import 100% can obtain a special VAT invoice, regardless of the VAT rate, the purchase and sale items can be offset, then, for this enterprise, only 40% of the value-added tax rate. So, now the 3% reduction in value-added tax, for the enterprise, only a reduction in the value-added tax burden of 1.2%, this 1.2%, or relative to the sales excluding tax, not for the sales revenue including tax. The relative tax-inclusive sales revenue before the tax reduction reduced the tax burden by only 1.0345 percent.
, therefore, from a pure tax reduction point of view of the decline in the tax burden, each enterprise tax reduction space, depends on the value-added rate of the enterprise and upstream enterprise tax reduction transfer. In fact, upstream companies are not likely to cut prices by 3%, it is reasonable to move part of the upstream tax cut downstream, as we have analyzed the example, the tax rate is reduced by 3%, corporate prices by 1.2%. Therefore, the situation requires upstream or downstream to reduce 3% of enterprises, either do not understand, or play hooligans for the sake of it. But in China this kind of rogue enterprises are very many, in reality, there are many large groups, enterprises are very strong, take the opportunity to ask its suppliers (especially the full market competition of the ministry) to reduce the price by 3%, suppliers in order to survive also have to accept!
, in fact, the reduction is only the tax rate, and commodity prices are not related!!!