Value Added Tax (VAT) is a type of indirect tax levied on the sale of goods and services. It is collected at each stage of the supply chain, from production to the final point of sale. Unlike sales tax, which is only collected at the final sale to the consumer, VAT is charged throughout the process—every time value is added.

VAT is designed to be paid by the end consumer, even though it is collected and remitted by businesses. Each business in the supply chain charges VAT on its sales (known as output tax) and can reclaim the VAT paid on its purchases (known as input tax).