Value added tax is the tax on the value added means profit margin . which is widely known as VAT its in leau of Local sales Tax .Its multiple point tax . Buyer/trader can take input credit means tax paid - tax collected = to be remitted .
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A value added tax (VAT) 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. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs.