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Full form of VAT
Asked by tg1022007 | 13 Oct, 2020, 12:08: PM

### Suppose A is a manufacturer, B is a dealer and C is a retailer and D is a customer.A sells an item to B at Rs.100 and tax rate is 10%At this point B pays Rs.100 + the tax(10)=Rs.110 to A.Now suppose B sells this item at Rs.200 and tax rate is 10% to C.At this point C pays Rs.200 + the tax(20)=Rs.220 to B.Now suppose C sells this item at Rs.300 and tax rate is 10% to D.At this point D pays Rs.300+the tax(30) = Rs.330 to C.The first tax paid by B Rs.10 is called as Service tax.Now the tax paid by C -tax paid by B = VAT for that transaction.=20-10=10Now the tax paid by D -tax paid by C = VAT for that transaction.=30-20=10VAT=Tax on sale-Tax on purchaseTotal VAT=addition of VAT for all the transactions.VAT is a value added tax

Answered by | 13 Oct, 2020, 05:27: PM

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