Monday, August 22, 2016

What is Value Added Tax or VAT

Taxation refers to the process of an authority levying certain charges on goods, services and transactions. It is one of the foremost powers held by the government of any country. Various types of taxes are applicable at various stages of sale of goods and services; VAT is one such tax.

What is Value Added Tax or VAT?

VAT is a kind of tax levied on sale of goods and services when these commodities are ultimately sold to the consumer.VAT is an integral part of the GDP of any country.

While VAT is levied on sale of goods and services and paid by producers to the government, the actual tax is levied from customers or end users who purchase these. Thus, it is an indirect form of tax which is paid to the government by customers but via producers of goods and services.

VAT is a multi-stage tax which is levied at each step of production of goods and services which involves sale/purchase. Any person earning an annual turnover of more than Rs.5 lacs by supplying goods and services is liable to register for VAT payment. Value added tax or VAT is levied both on local as well as imported goods.

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