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To realize the reasoning behind this calculation, please note that right after withdrawing the metal, this standard gold leaves a VAT exempt atmosphere (the SGE technique), for an environment that is not exempt from VAT, and hence VAT is born into existence. When Laofengxiang doesn’t withdraw the gold, the SGE invoice is the only invoice it will receive for accounting purposes – Laofengxiang requirements some proof for accounting entries. If it withdraws the gold, then it will get an SVI since the normal gold withdrawn can be manufactured into new gold merchandise and sold off-SGE. Consequently Laofengxiang will want to claim input VAT. Common VAT taxpayers that withdraw will get a SVI, people that withdraw kind the SGE will not. The input VAT noted on Laofengxiang’s SVI from the SGE is not an amount Laofengxiang paid to ICBC as VAT, but Laofengxiang is permitted to deduct this amount from its output VAT.
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