Question

Does the valueof VAT imposed by the state imposes on merchants necessarily affect the rise of goods to the consumer with the same value of VAT ?

example:.
A price of a pack of cigarettes is 25$.

The VAT that the state levies on merchants is 15%.

Is it necessary that a pack of cigarettes will be 25* 0.15=27.5%?

Answer 1

Yes vat imposed by the state on merchants necessarily affect the rise of goods to the consumer with thr same value because VAT is indireect tax which is levied on goods and services. And indirect means means those tax whose burden is shifted from one person to another and at last its burden is borne by the ultimate consumer. So, when the government imposes VAT on merchants they then add the value of VAT and then sell it to the retailer and then retailer who has paid the tax to the manufacturer he then add then value to the price of good and then consumer has to pay that value of tax. This process is also known as cascading effect