VAT means ‘Value Added Tax”. It has several forms of interpretations, viz:
- It is an indirect tax imposed upon goods and/or services, the impact of which falls upon the seller of goods or service-provider, while incidence is borne by the ultimate buyer or service-receiver. It is charged upon ‘value addition’ made by the seller/service provider, at every stage.
- It is a form of sales tax collected by the Government of the Destination State (i.e.the State in which the ultimate consumer is located) on an expenditure incurred by the consumer.
- It can also be defined as a tax on the value-addition at different stages of manufacturing and distribution of goods and services.
- It is a tax levied on the actual value added by a firm or individual on goods and services purchased from others. It is a tax on economic activity rather than on the end product. In its comprehensive form, it is applicable to producers, wholesalers, retailers, and other members of distribution channels.
- It is multi-point or multi-stage, commodity tax coupled with ‘credit of input tax’ on the inputs, e.g. raw materials in the hands of manufacture so as to minimize the cumulative/ cascading effect upon the ultimate price borne by the consumer. Similarly, the input tax credit is also available to the trader, who purchases goods for re-sale upon payment of tax.
- Value-added Tax, levy on the amount that a business firm adds to the price of a commodity during the production and distribution of a good. Three major types of value-added tax have been identified, depending on the deductions allowed, but. only one called the “consumption” type is widely used.
- Value-Added Tax (VAT). The VAT is a sales tax levied on the value-added to a product or service each time it changes hands. Unlike a multi-stage turnover tax or excise duty, VAT is applied to the value of a product every time it is sold in the process of production or distribution. It is assessed at each stage only on the increase in value acquired by the production since the last taxable transaction.
- Value-added tax (VAT) – Tax on consumption levied at each point where goods or services are exchanged in the course of production and distribution until they reach the ultimate consumer. At each stage, the tax is levied on the difference between the cost of the inputs- that is, the goods or services bought in at the beginning of the stage and the sale of the outputs sold at the exchange point at the end of the stage.
- Value-added tax (VAT) is a charge on taxable supplies of goods and services made in the UK by a taxable person in the course or furtherance of a business. Where appropriate, each trader adds VAT to sales and must account for the Board of Customs and Excise for the output tax. The input tax paid on purchases can be deducted from the output tax due.
- Value-added tax (VAT) is a form of excise tax at every stage in the value-adding chain. In the final analysis, the tax is imposed on the added value of the product or the service. It is collected at every production or marketing stage until it reaches the ultimate consumer. This is a tax on the net sale, that is, on the price paid for something after deduction of the costs paid before at every stage of the sale. The calculation is made by deducting from the sale price the price of raw materials or products acquired from another firm, and the tax is imposed on this difference. Eventually, the tax is paid by the ultimate consumer.
On the basis of various definitions and interpretation, the following characteristics of VAT can be narrated, viz:
- A Destination-based Multi-point System of Taxation
- Tax upon consumption of goods/ services
- Full credit of input tax available 4) Ultimate burden upon consumer
- Covers all the goods and service
For Citing this article use:
- Tendulkar, S. R. (2011) ‘Value added tax a new tool for fiscal reforms problems and prospects’, University. Available at: http://hdl.handle.net/10603/308601