What is value added tax with example

Perceived value added factors into the price of a product.Total bill = cost of the item + sales tax.They are usually imposed on a manufacturer or supplier who then passes on the tax to the consumer.Vat is charged at each stage of the production and distribution process, from the manufacturing of goods to their eventual sale.For example, all european countries levy a vat, according to the tax foundation.

Value added tax, or vat, is an indirect consumption tax charged on goods and services.Some similarities may be drawn between it and sales taxes, with the exception that with a sales tax, the entire amount owing to the government is paid by the customer at the time of purchase.For example, if there is a 20% vat on a product that costs $10, the consumer will end up paying a price of $12.Sales tax = tax% of bill amount.Value added = selling price of a product or service − the cost to produce the product or service.

A flour manufacturer may purchase wheat from a farmer.