Model 1
The VAT Mechanism — How it flows
Follow VAT through a three-stage supply chain. Each registered vendor collects output VAT, reclaims input VAT, and remits only the net. SARS always ends up with exactly VAT% of the final consumer price.
R
R
R
VENDOR 1
Raw Supplier
No input VAT
VENDOR 2
Manufacturer
Claims input VAT
VENDOR 3
Retailer
Claims input VAT
END USER
Consumer
Absorbs all VAT
Raw Supplier
Selling priceR 100.00
Output VATR 15.00
Invoice to buyerR 115.00
Value added
R 100.00
Input VAT claimR 0.00
Net paid to SARS
R 15.00
Manufacturer
Selling priceR 200.00
Output VATR 30.00
Invoice to buyerR 230.00
Value added (sells − buys)
R 100.00
Input VAT claim−R 15.00
Net paid to SARS
R 15.00
Retailer
Selling priceR 350.00
Output VATR 52.50
Invoice to buyerR 402.50
Value added (sells − buys)
R 150.00
Input VAT claim−R 30.00
Net paid to SARS
R 22.50
Consumer (end user)
Total paid to retailerR 402.50
VAT embedded in priceR 52.50
Price excl. VATR 350.00
No input VAT recovery. The consumer is the real taxpayer — all VAT ultimately rests here.
SARS — total VAT collected
From SupplierR 15.00
From ManufacturerR 15.00
From RetailerR 22.50
Total
R 52.50
✓
The VAT identity — always holds
SARS collected R 52.50 = 15% × R 350.00 (final retail price excl. VAT)
No matter how many vendors are in the chain, SARS always collects exactly 15% of the final selling price. Each vendor pays VAT only on the value they added.
Model 2
The VAT Area Model — Coverage and the net payable
Step through four stages to see how input VAT progressively covers the output VAT area. Width = units sold. Height = VAT per unit. The uncovered area at the top is your net VAT payable — and nothing more.