Addition method of VAT

Purchase 

purchase cost ........100

vat paid ......4%............4 ..................104

Sales 

Sales Value ..........125

Vat charged @ 4%.....5 ...................130    

Vat Liability now ...........5 

credit taken ....................4

Cash paid VAT..............1

so the Vat paid in final value addition of 25/- (125-100) is 4% of 25/- i.e 1/-

Hope this will clear the doubt