Hi Friend, The full form of VAT is Value added tax. As the name suggest it is that kind of tax which levied on the value added by the seller on the goods purchased/manufactured by him. The process is continuing one until the ultimate consumer purchase the goods for his own consumption.

vat is a indirect tax. It is a full form of value added tax. it is type of consumption tax.whenever value is added at the stage of production and the final stage. its bear the amount of only consumer.

Value Added Tax(VAT) is a type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale. The amount of value-added tax that the user pays is the cost of the product less any of the costs of materials used in the product that have already been taxed.

Its simple as name suggest Value added tax . One is charging certain specific % on value addition ( though in actual it is charging on all amount but can take credit of what he paid earlier , so net addition for value addition ) example You bought goods for 110 in which vat is rs 10 (VAT = 10 %) , Now you sale it for 150 by charging vat 15 (VAT = 15 % ) so VAT shall be net 5 payable (15-10 paid earlier) which is nothing but vat on net addition of rs 50 . Ultimate consumer will have to pay for all cumulative VAT.

Unlike the name suggest, VAT is NOT a tax on the margin of the business. VAT is a Consumption Tax, meaning, tax on consumption of goods by the consumers. VAT is to be borne by the consumers.