VAT

Value Added Tax or VAT is an indirect tax, which is imposed on goods and services at each stage of production, starting from the raw materials to the final product.

The key terms in VAT

• Output tax: This is the VAT added to the price when purchasing a product which is liable to VAT.

• Input tax: This is the VAT charged when a product or service is withdrawn for private use.

• VAT Payable/Refundable: It is the difference between Input tax and Output tax. If the output tax is high when compared to the input tax, then the difference is called VAT payable and if the input tax is higher than the output tax, then the difference is VAT refundable.

• Taxable goods/services: The goods and services on which a tax is chargeable

• Exempt goods/services: The goods and services on which no tax is chargeable

• Zero rated goods/services: The goods and services on which a tax is chargeable at 0%