What is VAT( Value Added Tax) ?

  1. Lovely 7 profile image67
    Lovely 7posted 5 years ago

    What is VAT( Value Added Tax) ?

  2. purnimamoh1982 profile image77
    purnimamoh1982posted 5 years ago

    A value added tax is an indirect tax imposed on each stage of production process when an input transforms into an output with higher value. For example, a loaf is made from flour and flour from wheat. So, there are two stages of production. First, wheat is converted into flour in a mill and the value of the output increases. A tax is imposed at this stage. At the second stage, bread loaf is made by a baker using flour and another tax is imposed at this stage. Thus instead of imposing one single tax on bread, the tax amount is divided in two phases. This is done primarily to increase tax base, reduce the psychological burden of tax, avoid double taxation and for better tax administration. One may find some simple write ups on different taxes at http://lokkatha.com especially in the section on economics.

 
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