A consumption tax levied at each stage of a product’s production and distribution. VAT is similar to a sales tax but is collected at multiple points in the supply chain. Businesses collect the tax from customers and remit it to the government, acting as intermediaries. The end consumer ultimately bears the cost of the tax.
Multi-Stage Taxation
VAT is applied at multiple points in the supply chain: Businesses collect tax on their sales and receive credit for the VAT they paid on their purchases. This prevents double taxation.
Consumption-Based
The final burden of the tax falls on the end consumer who purchases the good or service.
Global Use
VAT is a common form of taxation globally, implemented in over 160 countries. It is a significant source of revenue for many governments.
Exemptions and Reduced Rates
Some goods and services may be exempt from VAT or subject to reduced rates, often for social or economic reasons (e.g., basic necessities, healthcare, education).
