What is VAT in Simple Terms?

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VAT or Value Added tax is a form of tax imposed at every time a value is added to a product or service in the process of production or sale. As an example, VAT is paid by manufacturers, wholesalers, as well as the retailers on the difference between the price of purchase and the price of selling. The ultimate cost is passed over to the final consumer and businesses are the middle men which gather and pay the VAT to the government. VAT will make sure that all levels of supply chain will pay taxes. It is an equal and effective system that prevents tax evasion and facilitates open business activities. what is vat tax