What is the concept of VAT?
VAT or Value Added Tax is a type of tax that is charged by the Central Government on the sale of services and goods to the consumers. VAT is paid by the producers of services and goods, but it is finally imposed on the consumers who purchase the services and goods when they pay for it.
How is VAT determined?
The amount of VAT is decided by the state as a percentage of the price of the goods or services provided. The VAT collected by the state from each company is the difference between the VAT on sales and the VAT on purchase of goods and services upon which the product depends, i.e., the net value added by the company.
Why does VAT exist?
VAT was introduced in 1973, replacing the Purchase Tax. This previous tax was levied when goods and services were produced and distributed not when they were sold, as is the case with VAT. The Purchase Tax had a different rate for different types of goods.
What is Value Added Tax in simple terms?
VAT stands for Value Added Tax and is a general tax placed on almost all goods and services sold. The simple principle behind VAT is consumers pay a tax on the products they buy based on the value of the product. VAT rates are percentage based, which means the greater the price, the more the consumer pays.
What is the purpose of value added tax?
A value-added tax (VAT) is paid at every stage of a product’s production from the sale of the raw materials to its final purchase by a consumer. Each assessment is used to reimburse the previous buyer in the chain. So, the tax is ultimately paid by the consumer.
What is value-added?
Value-added is the difference between the price of a product or service and the cost of producing it. The price is determined by what customers are willing to pay based on their perceived value. Value is added or created in different ways.
What are the types of value added tax?
There are three types of VAT, they are: Consumption type. Income type. Gross National Product (GNP) type.
Who introduced VAT?
On 1 January 1973 the UK joined the European Economic Community and as a consequence Purchase Tax was replaced by Value Added Tax on 1 April 1973. The Conservative Chancellor Lord Barber set a single VAT rate (10%) on most goods and services.
What is Ghana VAT?
Value-added tax (VAT) The standard VAT rate is 12.5%, except for supplies of a wholesaler or retailer of goods, which are taxed at a total flat rate of 3%. VAT is charged on the supply of goods and services where the supply is a taxable supply and made by a taxable person in the course of business.
What is the importance of value added tax in the Philippines?
Value-Added Tax (VAT) is a form of sales tax. It is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines.
How is the Value Added Tax ( VAT ) calculated?
The amount of VAT that the user pays is based on the cost of the product, less any costs of materials used in the product that have already been taxed at a previous stage. The value-added tax is a type of consumption tax .
Which is an example of Value Added Tax?
That is: Total Payable VAT to the government = Output VAT – Input VAT. Value Added Tax Calculation With Examples. Example 1. In 2005, a phone manufacturer sold a smartphone to a final consumer for N250,000.
What do you need to know about VAT identification number?
VAT identification number. A value added tax identification number or VAT identification number (VATIN) is an identifier used in many countries, including the countries of the European Union, for value added tax purposes.
How much does it cost to add VAT to a product?
With the above example, the input cost for the Manufacturer will be $20. The same would be sold to a retailer at the price of $30, and the final price charged to consumers is $44 (Cost price 40 plus VAT @10 % is $4, so totals to $44).