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What is Value Added Tax (VAT)?
What is VAT & how does it work?
Which mathematical expression is used to calculate VAT?
What is input VAT?
Apr 24, 2024 · Value-added tax (VAT) is an indirect tax that is charged at the time of consumption of goods and services and is levied when a value has been added over various stages of production/ distribution, right from the purchase of raw materials till the final products are sold to the retail consumers.
VAT is a purchase tax added onto items that are bought, except things that are zero-rated, such as food, because these are deemed essentials. VAT is a percentage of the...
It is a tax on the value added at each transfer of goods, from the original manufacturer to the retailer. Suppose for example, the rate of tax is 10% and a trader purchases an article for $ 800, the tax he pays = 10% of $ 800 = $ 80. Now, if he sells the same article for $ 1150.
VAT or Value Added Tax is also a type of tax charged by the government for public welfare expenses. This tax is already included in the price of the product. At present, a percentage of VAT is imposed in almost all the products and services. Let us see an example of value added tax.
Previous. 11.3 Interest. Next. End of chapter activity. 11.4 Value Added Tax (EMG6M) As we learned in Chapter 4, VAT is the acronym for Value Added Tax. VAT is a form of tax that everybody has to pay when buying goods and services. It is charged as \ (\text {14}\%\) of the price of the goods.
Rule. Finding the price including VAT. Price incl. VAT = price excl. VAT ⋅ ( 1 + VAT 1 0 0 ) Example 1. An item costs $ 4 0 excluding VAT. The VAT for this item is 2 0 %. How much is the item including VAT? The calculation goes like this: Price incl. VAT = 4 0 ⋅ ( 1 + 2 0 1 0 0) = 4 0 ⋅ 1. 2 0 = $ 4 8. 0 0.
VAT is a tax on the value added at each transfer of goods, from original manufacturer to the ultimate customer. VAT is calculated on the sale value by applying the rate of tax as applicable. Examples