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enables both business leaders and students to understand the basic concept of the VAT system and what is required by the commissioner (SARS).
VAT in essence is payable by the end user of the product as a form of tax collection.
Many businesses often forget that they are the “tax collector” appointed by SARS to collect the taxes payable by the customer for procuring their product.
Attached is the SARS publication on the guide for VAT.
It is an extensive booklet but below is the simple laymens version of what this tax is and how it really works.
VAT stands for Value Added Tax and essentially levers a tax on the value being added throughout the process.
The mechanism is trying to ensure that each value creator in the process of creating the value added to the product only collects the Value Added Tax for that value that they created.
To enable this each seller (that is VAT registered, must collect the OUTPUT VAT for the sale but reduces the VAT payable by the INPUT VAT that they expnded,
This model illustrates how VAT is passed on through the processes of adding this value.
In the final step the end user pays for the VAT created in total without having the opportunity to collect or reduce that tax.
