21 September 2011
Under Value Added Tax Scheme, the tax can be paid for the portion which you added the value to avoid the cascading effect of tax, suppose you purchase material for Rs. 100 and paid the VAT Rs. 5 so this Rs. 5 is your input tax credit, and if the material selling by you for Rs. 110 so you need to charge Rs.5.50 as VAT and pay to government, on that payment of Rs.5.50 you can adjust the Rs. 5 input credit which you paid already on purchase and can be pay only Re.0.50. like this VAT mechanism is working
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