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What is Value Added Tax (VAT)?

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CBSE/Class 12/Commerce/Entrepreneurship Tuition/Class XI-XII Tuition (PUC)

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Value Added Tax (VAT) is indirect tax. VAT is called as a destination based tax (Consumption Based Tax). VAT is levied on value addition at each stage of production of goods and services which involves sale or purchase. The term 'value addition' implies the increase in value of goods and services at... read more

Value Added Tax (VAT) is indirect tax. VAT is called as a destination based tax (Consumption Based Tax). VAT is levied on value addition at each stage of production of goods and services which involves sale or purchase. The term 'value addition' implies the increase in value of goods and services at each stage of production or transfer of goods and services. VAT is a tax ultimately borne by the consumer or end user who purchases the goods / services.

For example: A farmer grows a wheat and sell it to a flour manufacturer at Rs.50, who convert the wheat into wheat flour and sell it the consumer or end user at Rs.120. Here the value added is Rs.70 (Sales price (Rs.120) Minus Purchase Price (Rs.50). In this case, the tax will be levied on Value addition i.e. Rs.70.

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Accounts Tutor, Softskill Trainer, BFSI Trainer, Equity and Derivatives Market Trainer

Value Added Tax (VAT) is indirect tax. VAT is called as a destination based tax (Consumption Based Tax). VAT is levied on value addition at each stage of production of goods and services which involves sale or purchase. The term 'value addition' implies the increase in value of goods and services at... read more

Value Added Tax (VAT) is indirect tax. VAT is called as a destination based tax (Consumption Based Tax). VAT is levied on value addition at each stage of production of goods and services which involves sale or purchase. The term 'value addition' implies the increase in value of goods and services at each stage of production or transfer of goods and services. VAT is a tax ultimately borne by the consumer or end user who purchases the goods / services.

For example: A farmer grows a wheat and sell it to a flour manufacturer at Rs.50, who convert the wheat into wheat flour and sell it the consumer or end user at Rs.120. Here the value added is Rs.70 (Sales price (Rs.120) Minus Purchase Price (Rs.50). In this case, the tax will be levied on Value addition i.e. Rs.70.

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VAT is predominantly a state tax (revenue for state) which is levied at every stage the product passes through. At each stage the person selling collects VAT from the buyer. While paying this tax to the Government, he will deduct the VAT that he has paid when he purchased items and pays the balance to... read more
VAT is predominantly a state tax (revenue for state) which is levied at every stage the product passes through. At each stage the person selling collects VAT from the buyer. While paying this tax to the Government, he will deduct the VAT that he has paid when he purchased items and pays the balance to the Government. However, note that GST is the current relevant Indirect tax and not VAT. read less
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Tutor

Value-added tax (VAT) is a type of consumption taxthat is placed on a product whenever value is added at a stage of production and at the point of retail sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already... read more

Value-added tax (VAT) is a type of consumption taxthat is placed on a product whenever value is added at a stage of production and at the point of retail sale. The amount of VAT that the user pays is on the cost of the product, less any of the costs of materials used in the product that have already been taxed.

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