VAT - I'ts Full Form, Definition, How to calculate, and Procedure

What is Value Added Tax?

The VAT full form is Value Added Tax. The VAT meaning in tax, it is a type of indirect tax imposed on services and goods. This tax is paid to the government at every supply chain stage by all producers. 

The VAT tax is applicable within a particular state on the goods. It will be added only when the buyer and the seller need to be in the same state. It is charged on the gross margin in the sale of goods. Tax is collected at every stage, from the manufacturer to the retailer.

VAT removes the tax-on-tax effect because it is a multistage tax system. It is a provision for collecting the tax paid on the purchases every time a sale is made. The VAT laws are different for every state and union territory. The threshold limit for exemption is also different for every state.

How is VAT Calculated?

There are two components of the Value-Added Tax (VAT), and they can be calculated by using them:

1. Output VAT: Output VAT is a tax paid by the customers that is charged on the taxable sales made by the dealers, such as manufacturers, wholesalers, or VAT-registered retailers.
2. Input VAT: Input Value Added Tax in India is a tax that is paid on the purchases made by the dealers. 

The Value Added Tax formula is:

VAT = Output Tax - Input Tax

Procedure for VAT online registration

Here is the process of registering for the Value Added Tax in India:

• Visit the official website of VAT and click on the registration tab after logging in. 
• Fill in the required details on the website, and also upload the scanned copies of the necessary documents mentioned on the website.
• You will be provided with a temporary VAT number for registration.
• Once your application and documents are verified, your company will be given a permanent VAT registration number.