VAT: Meaning of Value Added Tax

We have already included Value added tax (VAT) in our classification. So, VAT is an indirect Tax.

It is an improved and modified form of the income tax. It is leviedon the value added of goods and services at each stage in the process of production and distribution chain. The stages can be import, manufacturing or retail.

Value added for a firm is sales value minus all expenditures on goods and services purchased from other firms. It can be obtained by adding payments to the factors of production like

• wages 
• salaries
• rents
• interest
• profit

 Although VAT is eventually borne by the fnal consumer, it is collected at each stage of production and distribution chain. Currentl a Vat of 13% is applid in our country.