IntroductionValue added tax (VAT), or goods and services tax (GST), is a consumption tax levied on value added. Unlike sales tax, VAT is neutral with respect to the number of steps there are between the producer and the final consumer; where sales tax is collected on the total value at each stage, the result is a cascade (output taxes collected on input taxes). Exports, by definition, are consumed abroad and are usually not subject to VAT; VAT charged in such circumstances is usually refundable. This avoids downward pressure on exports and, ultimately, export earnings. VAT is an indirect tax, meaning the tax is collected by someone who does not bear the full cost of the tax. VAT was invented by a French economist in 1954 as taxe sur la valeur ajoutée (TVA in French). Maurice Lauré, joint director of the French tax authority, the Direction générale des impôts, was the first to introduce VAT starting from 10 April 1954 for large businesses, and then extending it over time to all economic sectors. In France, it is the most important source of state funding, accounting for approximately 45% of state revenue. Personal end consumers of products and services cannot recover VAT on purchases, but businesses can recover VAT on the materials and services they purchase. purchase to make further supplies or services sold directly or indirectly to end users. In this way, the total tax collected at each stage of the economic supply chain represents a constant fraction of the value added by a company to its products, and most of the cost of collecting the tax is borne by the company, rather than by the company. state. VAT was invented because very high sales taxes and tariffs encourage fraud and smuggling. It has been criticized on the grounds that (like other consumption taxes) it is a regressive tax. Comparison with Sales Tax Value-added tax avoids the trickle-down effect of sales tax by taxing only value added at each stage of production. Value-added tax is gaining favor over traditional sales taxes around the world. In principle, value added tax applies to all commercial activities involving the production, distribution of goods and provision of services. VAT is assessed and collected on the value added to goods in every business transaction. Under this concept, the government is paid taxes on the gross margin of each transaction. VAT proposes to replace