MANAGEMENT VOCABULARY 9 VAT

I am reminding you that my posts are meant for enriching your vocabulary in different fields of knowledge. The intention is not to make you an expert in a particular field. As an educated person, you should have a very broad idea of almost everything that has a bearing on your life.


When you read newspapers, they talk about VAT. In the context of taxation,we should understand this acronym for VALUE ADDED TAX.

VAT is formed by the first letters of the three words of VALUE ADDED TAX.

In all good dictionaries, you will find this term.

Value-added-tax

VAT is very popular in many countries. It is a tax paid by a seller to the government only on the value added by him to the product.

I am trying to make you understand the concept. Suppose a person purchases certain goods and uses them in producing a product. He incurs costs on the input which has a component of tax paid to the government. After producing the product,he sells the same to another person at some higher value. In other words,he adds value to the product. While paying tax to the government on this product, he takes credit of tax already paid on the product. His net liability is only on the value added by him. If the person who purchases this product, is the ultimate consumer,he suffers the burden of all taxes paid at every stage on the product. Therefore, the incidence of Value added tax is on the ultimate consumer. To him, it is nothing but a sales tax. So VAT is a tax on consumption.


Hope you understand clearly the concept of VAT.

REST IN MY NEXT POST.

Sayee Jayaraman
02/03/2015