VAT stands for Value Added Tax. Known in some countries as goods and services tax (GST) which, like income tax, is dependent on the value increase of a product or service at each stage of production and distribution. However, a VAT is collected by the retailer and is typically a flat tax. Thus, it is frequently compared to a sales tax.
Our VAT calculator is a tool you can employ to calculate the amount of VAT you have to pay and the gross price of the product based on its net value. The ecalculator's VAT calculator online has popular user base from many countries especially South Africa and UK.
Besides, you may use this calculator to add VAT or remove it to or from the net or gross amount. Before you use this online tool, you may want to look into its definition, its history, how to work it out manually and its economic implications.
Value added tax is a consumer tax therefore, it is applicable to goods and services and thus consequently, it is also called goods and services tax (GST) known in some countries like in Singapore, Australia, Canada and New Zealand.
As the name also suggests, it is a tax that applies on the "added value" which is the sale price of a product after deducting the material costs and other taxable inputs. Another type of consumption tax is known as the sales tax.
VAT/GST as mentioned above, applies to each stage of production of goods and services. For this reason, it is also called multi-stage tax and is computed based on the "added value" only.
It implies that each player in the production chain pays VAT only for the "added value" they produce. This phenomenon goes on until the product reaches its final recipient - the end user. The end consumers do not produce any "added value", therefore it is them that have to pay the tax.
In contrast however, the retail sales tax is a single-stage tax charged on the complete value on goods or services when their sale takes place. Therefore it is paid only once unlike VAT, which is calculated a number of times.
Sales tax can be calculated manually but to save themselves time, users can employ Our Sales Tax Calculator can compute the tax in a split second.
VAT and GST are often confused with each other but there are specific differences that can be extracted from their implementations.
Both these taxes are present in multiple stages of transactions and depend on the value added. However, VAT procedure is related to the manufacturing and distribution chain while GST on the other hand, appears in the supply chain. In other words, VAT is tied to the moment of sales while GST is related to the point of supply.
Moreover, VAT applies on the final consumption of goods and services which is entirely borne by the end user unlike GST, which is a single tax on the supply of products and services.
Tax credit paid at each stage is added in the subsequent stage of value addition. This makes GST a tax applied only on value addition at each stage. The end user will therefore, have to pay only the GST charged by the last dealer in the supply chain.
On an endnote, you can also calculate GST with our GST Calculator.
To calculate VAT on VAT calculator UK, you have to:
1: Infer the net price. Let's say it is $50.
2: Determine the Value Added Tax Rate. It is supposed to be 25% in this example. When put in percentages, it is divided by 100. So, 25 / 100 = 0.25.
To calculate VAT amount: multiply the net amount with VAT rate. $50*0.25 = $12.5.
To find the gross price: multiply the net price with VAT (again, the answer would be $12.5) rate and then:
We add it to the VAT exclusive price to get the VAT inclusive price. $50 + $12.5 = $62.5. In essence, it's just a particular type of net to gross calculation. However, manual VAT.
However calculating VAT manually could be hectic especially for people who hate math, at some point, don’t us all?
The ecalculator’s online VAT calculator was developed for the above mentioned reason. It calculates VAT in real time and saves people from taking on the labor of manual VAT calculation.
All you have to do is enter the Net price and Vat Rate percentage and it will calculate the VAT for you in split second. For convenience, Ecalculator has added the options for computing VAT for multiple currencies like Euro, Pound, Dollar and others. It is free to use and doesn’t ask for user registration either.
The standard VAT rate is 15%. However, it changes depending on the states and products worldwide.
In UK, VAT rate is currently 20%. Nonetheless, you have to be mindful of other VAT rates as a business. The reduced rate of VAT is paid at 05% for sanitary, energy saving and child's car seats.
A significant number of Economists believe that income tax affects saving behavior as it downplays earning. Thus, it is believed that VAT causes decrease in disposable income that people could have saved.
On the other hand, a consumption tax comes up only when spending is done from savings; therefore, it doesn't affect saving decisions. Since more savings contribute to more investment, depending more on consumption tax might favor more economic growth.