03 July 2011
VAT means Value Added Tax. Previously there was Sales Tax Act and now this new Act in the name of VAT has been replaced in place of Sales Tax Act.
How it works. VAT means the you have to pay tax on whatever value you add on any goods. Say you have purchased goods for Rs. 110 which includes VAT of Rs. 10/-. Now you have Sold the Goods for Rs. 150/-. Hence you have added the value by Rs. 40/-. In simple language you have to pay VAt on Rs. 40/- or other wise you calculate VAT on 50/- (150-100) Cost of Goods and from the VAT you deduct the VAT of Rs. 10/- which you have Paid.
This is VAt. I think you have understood what is VAT. Still there are Registered and unregistered dealer and so on.
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