About this calculator
The VAT Calculatorletsyou calculate the value added tax of a product or service.
VAT definition
Value Added Tax (VAT) is a type of consumption taxes levied on sale of goods and services within every stage of production and distribution with value added. Rather than a business receiving one payment only when a final consumer purchases the product, VAT is levied progressively on businesses: a seller charges VAT on his sales and is often able to recover the amount of VAT he paid during his purchases. The overall impact is that the ultimate consumer ends up paying the taxes, whilst companies are tax collectors to the government.
Practical implementation: an example would be a manufacturer sells a widget to a retailer, the manufacturer collects VAT upon sale and the retailer collects VAT upon selling, but subtracts the amount he paid to the manufacturer itself and remits the difference to the tax authority. Companies with registration exceeding the registration limit of a country should register under VAT, put up VAT invoices, and file periodic VAT returns. Standard rates of VAT are also published in many countries, as well as lower rates on necessities and occasionally zero rates or exemptions on selected goods and services (e.g., in some jurisdictions, some foodstuffs, healthcare or education are zero rated or exempted).
For example, if an item costs $ 100 and the VAT rate is 20%, the VAT is $ 20, making the total price $ 120. To find the base price from a total that already includes VAT, divide the total by 1.20 ( $ 120 ÷ 1.20 = $ 100), and the VAT is the difference ( $ 120 − $ 100 = $ 20).
What is the difference between VAT and GST?
VAT (Value added tax) and GST (Goods and services tax) are types of consumption tax levied on commodities and services, though they are different in terms of their scope and format. VAT is imposed at both levels of production and distribution where the businesses are charged tax on the value that they add. The tax is imposed at the national or the state level mostly separately depending on the country. GST, however, is an all-inclusive, integrated tax which incorporates various indirect taxes (such as VAT, service tax and excise) in one tax system. It is levied on the supply of goods and services between the manufacturer and the consumer to the consumer and usually it is adopted at the national level with state level provisions of revenue sharing.
Vat vs Sales tax
Both VAT (Value Added Tax) and sales tax are consumption taxes with the difference that they differ in their modes of collection. VAT is levied at every production and distribution point, and in this case, businesses must receive tax in terms of the value they add and remit it to the government in stages hence the government gets the revenue in stages. The sales tax on the other hand is commonly levied at the ultimate point of sale to the consumer. This implies that VAT is collected at every stage of the supply chain whereas sales tax can be collected only once, and therefore, VAT is less subject to tax evasion and tax cascades. They both collectively tax consumption but VAT serves to distribute the process of collection to several stages where sales tax is based on the final transaction alone.