How does the VAT procedure function?
The VAT procedure functions through accepting input tax credit at every level of supply. The taxpayer, in accordance with the law and relevant rules and through maintaining accounts during every tax period, accepts paid-up VAT on purchased input or goods. The VAT chain is maintained through accepting credit at every level of supply and paying Value Added Tax on all value additions.
| Stage | Price on which Value Added Tax may be levied | Value Added Tax (Rate of Tax-15%) | Credit | Net VAT | Addition |
| Import/ input accumulation stage Supposedly, the price at Import/ input accumulation stage- 1000/- | 1000/- | 130.43/- | 0/- | 130.43/- | 1000/- |
| Output stage Supposedly, sale price by the producer at output stage- 1500/- | 1500/- | 195.65/- | 130.43/- | 65.22/- | 500/- |
| Wholesale stage Supposedly, sale price by the seller at the wholesale stage- 2000/- | 2000/- | 260.87/- | 195.65/- | 65.22/- | 500/- |
| Retail stage Supposedly, sale price at the retail stage- 2500/- | 2500/- | 326.09/- | 260.87/- | 65.22/- | 500/- |
| Tax paid by the consumer (on the final price- 2500/-) | 326.09/- |
