China switched to the value added tax instead of the business tax on May the first. How will the change affect companies' operations? CCTV spoke to a number of businesses in the service sector to find out.

Restaurants and food stands are one of the beneficiaries of the tax change. Businesses like this dessert shop now have lower tax rates.

There are two types of businesses under the VAT arrangement, small scale taxpayers and general taxpayers who record more than five million yuan in annual sales.

General business are now subject to a higher tax rate of five or 11 percent, compared to their previous rate of three or six percent. But that doesn't necessarily mean higher tax expenses. Hotel managers say for instance, they can lower their tax burden through several new deductions.

Analysts say the policy allows the VAT taxes paid at one stage to be taken as an input credit at the next. The more taxes are deducted, the less the costs for downstream businesses.

An estimated 500 billion yuan in taxes will be cut this year. The government hopes to slash the corporate burden to pump more power into China's economic growth.

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