How does the VAT procedure function?
The VAT procedure functions through accepting input tax credit at every level of supply. The tax payer, 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, price at Import/ input accumulation stage- 1000/-
Supposedly, sale price by the producer at output stage- 1500/-
Supposedly, sale price by the seller at wholesale stage- 2000/-
Supposedly, sale price at retail stage- 2500/-
|Tax paid by the consumer|
(on final price- 2500/-)