Question

Consider the following statements with respect to Value Added Tax :

1. VAT is tax imposed on value added on each stage of production, distribution
and sale of a product.
2. VAT works with principle of input tax credit.

Select the correct statement/s from above

• A. 2 only
• B. 1 only
• C. Both 1 and 2
• D. None of the above

Answer 1

The correct option is C Both 1 and 2

<!--td {border: 1px solid #ccc;}br {mso-data-placement:same-cell;}--> The value added tax (VAT) is charged on the value addition to goods, levied on the price of a product or service at each stage of production, distribution, or sale to the end consumer. with the VAT liability being calculated on by reducing the input tax credit from the output sales tax during the payment duration.

Input tax credit means that at the time of paying tax on output, you can reduce the tax you have already paid on inputs and pay the balance amount.