VAT definition
A value added tax (VAT) is a tax on spending on goods and services
From the perspective of the buyer, It is a tax on the purchase price.
From the perspective of the seller, It is a tax only on the "value added" to a product\material\service.
In simple words
“It is a tax levied on the value added to any product or service at EVERY STAGE”
VAT Calculation
Input VAT:-
Tax that is paid by a business to other businesses on the supplies that it receives is
known as "input VAT"
Output VAT :-
Tax that is Received by a business from other businesses on the supplies that it sells is
known as "output VAT"
VAT = Output VAT – Input VAT
VAT Exclusive = (Amount X Tax Rate) / 100
VAT Inclusive = (Amount X Tax Rate)/ 100+ Tax Rate
Example
Amount = 100
Tax Rate = 10 %
Exclusive VAT = (100 X 10)/ 100 = 10
Inclusive VAT = (100X10)/100 + 10 =9.09
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