Cash Management Interview Question:

What are the types of VAT? How VAT works?

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We can see it with example:
goods Purchase= 20000
Input Tax @ 4 % = 20000*4%= 800
now we sold this goods
Sale = 35000
Out put tax @ 4 % = 35000*4% = 1400

When we purchased Goods the saler collect a tax value from us as a sales tax. then we sold goods. we charge a tax amount in invoice. finally wen we pay tax to govt.
then total value of tax payble will be : Out put tax - Input Tax= 1400-800 = 600.

So Nett Tax payable Amount Is Rs. 600. this amount is a part of total value added in sales price not that sales price.
we can see it : Total Value add: Sales - Purchase = 35000-20000= 15000.
and tax amount on value added:15000*4 % = 600.
it has been proved that VAt Is an value added Tax.
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