VAT
WHAT IS VALUE ADDED?: The "value added" at each stage includes inputs such as labour, overheads, transportation and profits. For example: If a furniture manufacturer who is registered for VAT, purchases lumber for $100, makes a table and sells it for $150, the value added is $50. He would charge VAT at the rate of 16% on the selling price of the table which includes the cost of purchases and the value added such as labour.
Any VAT, which he incurred in the purchase of the lumber and the other items, will be deducted from the VAT collected from his customer on the sale of the table. Only the difference will be paid directly to the Guyana Revenue Authority.
WHAT IS VAT?: Value Added Tax or VAT, as it is popularly known, is a consumption type tax that is applied on all goods and services whether imported or manufactured locally, except where the goods and services are exempted or zero –rated from VAT. VAT is designed to ensure that all forms of consumer spending are taxed evenly and fairly.
It is imposed on imports and the value added (or the mark-up added) to imports and other goods and services supplied by one business to another or to a final consumer. Although VAT is paid on inputs used to produce goods and services, VAT is not a tax on tax. The tax is charged on the cost of inputs and the value added. VAT will be applied on the value added to goods and services at each stage in the production and distribution chain.
The tax paid on inputs by a registered producer, wholesaler, or retailer is deducted from the tax received on their output and only the difference is paid or credited against future VAT liabilities. In each such transaction, the buyer pays the tax, so VAT is not a tax on the producer or supplier of goods and services. The producer or supplier of the goods will simply collect the tax on behalf of the Government.
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