Question

Please anyone can explain me thoroughly the term :-
$vat$
with the required formulas...✍✍
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Answer 1

VAT = OUTPUT TAX – INPUT TAX

This formula easily acts as a VAT calculator. Let us take an example to understand the calculation of VAT properly. Assume that Raju is the owner of a hotel. He bought raw materials worth ₹ 1, 00,000 and an input tax of 10% was imposed on raw materials. Therefore, the total input tax incurred by him becomes 10% of ₹ 1,00,000, that is, ₹ 10,000.

Now after selling food that was made using those raw materials, he was able to earn a total of ₹ 2,00,000. If we consider the total output tax to be 10% of the earnings, then the total output tax becomes 10% of ₹ 2, 00,000, that is ₹ 20,000. So, we can easily ascertain the total VAT payable by Raju by deducting the input tax from output tax. Therefore, VAT= 20,000-10,000, that is ₹ 10,000.

Answer 2

VAT = - input tax + Output tax