What is VAT?

 Value Added Tax or VAT is an indirect tax that is paid by the consumer through a registered person. Value Added Tax or VAT on particular goods or services is determined on the basis of adding the actual level of value of the said goods or service adjusting input tax payable against the supplied goods or service. 

Supposing goods were purchased for Taka 1000 and it was sold at Taka 1500, in that case, an amount of Taka 130.43 was included as VAT for the purchase of Taka 1000 (Calculation: 1000×15/115); likewise, a VAT amount of Taka 195.65 shall be inclusive of Taka 1500, if the goods are sold at that price. (Calculation: 1500×15/115).

The actual addition will be Taka 500 if the goods are sold at Taka 1500 and as the seller had paid the price of the goods during purchase inclusive of the VAT, he will pay the VAT at the actual level of addition at the stage of sale, that is on Taka 500, taking back the VAT paid by him at the stage of purchase.

Payable VAT on Taka 1500= Taka 195.65

VAT included in Taka 1000= Taka 130.43

Net payable VAT on Taka 500= Taka 65.22 (Calculation: 500×15/115)

Method of calculation by seller= (1500×15/115) – (1000×15/115)=195.65-130.43=65.22 Taka