What exactly is VAT in layman terms. How is it levied & collected?

Answer 1

Hi. As you are already aware VAT refers to Value Added Tax...

When a product or service passes hands from the supplier to the manufacturer, trader, retailer, etc., the cost of the product increases and hence the tax component increases...

Now, with sales tax, the government earns tax when the sale is made and is time consumed between date manufactured to date of sale is huge.

Hence, this VAT - as and when its manufactured, its taxed as VAT. When it goes from manufacturer to Trader, there will be a small increase in price and he pays tax only on the increased cost and it goes on and on till the product is finally purchased and all tax is recovered from the consumer.

regards,

cheers,,,

Answer 2

Value added tax (VAT) is a type of sales tax. In some countries, including Australia, Canada, New Zealand, and Singapore, this tax is known as "goods and services tax" or GST; and in Japan it is known as "consumption tax". VAT is an indirect tax, in that the tax is collected from someone other than the person who actually bears the cost of the tax (namely the seller rather than the consumer). As VAT is intended as a tax on consumption, exports (which are, by definition, consumed abroad) are usually not subject to VAT or VAT is refunded.

Answer 3

In layman's terms, it's a tax that replaces sales tax and it's a tax that is used at every step involved in adding Value to the product, this way the revenues of the government is kept in check and it allows a streamlined process of taxing. In theory it's very efficent for a disciplined and mature market.

Answer 4

It stands for Value Added Tax as it is used in U.K. It is imposed the Government. However, in Singapore, it is known as GST, Goods and Services Tax.