Value-added Tax

What is value-added tax?

Value-added tax (VAT) is a consumption tax that is levied on the sale of goods and services. It is a type of indirect tax, which means that it is not paid directly by the consumer, but is instead added to the price of the goods or services and collected by the seller.

How VAT is calculated?

VAT is calculated as a percentage of the sale price of the goods or services, and the percentage varies depending on the country and the type of goods or services being sold. In general, VAT is applied to most goods and services, but there are some exceptions, such as certain essential items such as food and medicine.

Difference between VAT and Sales Tax

VAT is different from a sales tax, which is a tax that is levied only on the sale of certain goods or services. Unlike a sales tax, VAT is applied to the value added at each stage of the production and distribution process, from the production of raw materials to the final sale of the goods or services to the consumer.