Lesson
Title: Value Added Tax (VAT).
Objective :
At the end of this lesson, you'll be able to solve problems related to VAT.
What you should know :
You should be familiar with fractions operation- Division, Multiplication, and Addition.
Introduction :
Value Added Tax (VAT) is simply a direct tax that is added to the price of goods and services. The VAT is collected from the people who pay for goods and services and sent to the government, usually quarterly or annually.
The current VAT of Nigeria is 7.5%, this might vary from other countries.
Presentation/ Steps:
Ex1. Mr Alabi took his family to a shopping mall, after shopping, he went to the counter to make payment and was given a receipt that showed the total amount of ₦ 15000 plus 7.5% VAT. How much did he pay in total?
Step :
Total Amount = ((VAT + 100)/100)* Items amount.
=> ((7.5 + 100)/100) * 15000
=> (107.5/100 ) * 15000
=> 1.075 * 15000 = 16125.
=> Therefore, the total amount paid by Mr Alabi with VAT inclusive is ₦16125.
Summary / Conclusion :
VAT is simply a direct tax that is added to the price of goods and services.
VAT is an important concept when it comes to generating revenues. All VAT proceeds are collected by revenue collecting agencies and the proceeds are remitted to the government.
Exercise :
Mr Bryan's company remits ₦208000 to the government as VAT for the year 2022. Calculate the annual revenue of his company in 2022.