Who pays VAT?

The procedure of Value Added Tax or VAT is an automatic taxing procedure based on input tax credit against supply or sale. The supplier accepts the paid-up VAT on the purchase tax of the goods or service during the purchase as credit as against the VAT included in the price during the supply of such goods or service and he pays the net amount of VAT. Therefore, the seller realizes the VAT from within the price obtained from the buyer and deposits the net amount of VAT to the Government treasury after taking credit on VAT at the purchase level.

As VAT is considered to be a consumer tax, the consumer shall pay the whole amount of VAT as applicable on goods or service. As an intermediary procedure, the producer, the supplier, all, at every level of sale, shall realize VAT on behalf of the Government and deposit to the Government treasury.