CLE::VAT

The following model gives a comparative statement of taxes collected and prices charged under the First Point Tax system and the VAT system:

1 Manufacturer and 2 Distributors-Assumed VAT rate and present rate 12.5%

	VAT System				Earlier System
	Purchase	VAT	VAT		Purchase	Tax
Manufacturing Stage	Cost	paid	Credit		Cost	paid

Raw material Purchased	100	4	4		104	4
Add:
Value addition	20				20
Profits	20				20
	140				144
Add:
VAT 12.5%	17.5	13.5			18	18

Billing to Distributor	157.5				162

Distributor 1

Cost of Product	140	17.5	17.5		162
Add:
Profits	10				10
	150				172
Add:
VAT 12.5%	18.8	1.3		1% RST	1.72	1.72

Billing to Dealer	168.8				173.72

Dealer
Cost of Product	150	18.8	18.8		173.72
Add:
Profit	12				12
	162				185.72
Add:
VAT 12.5%	20.3	1.5		1% RST	1.86	1.86

Billing to Consumer	182.3				187.58
Total tax paid