VAT Tax

A value-added tax (VAT) or general sales tax (GST) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the value added to a product, material or service, from an accounting point of view, by this stage of its manufacture or distribution.

A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that with the sales tax, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, on the other hand, collections, remittances to the government, and credits for taxes that are already paid occur each time a business in the supply chain purchases products.

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