বাংলা

According to principle of VAT, VAT is payable by the buyer on the amount charged by the seller. So VAT is applicable on the amount of sale / contract price excluding VAT but including IT.

Following two simple formulae are used for calculation of VAT:

VAT Formula #1: V = Ci * v /100

VAT Formula #2: V = Ct * v / (100+v)

Where,

V = VAT amount

Ci = Contract / sale price excluding VAT but including IT

Ct = Total Contract price including VAT and IT

v = VAT rate (percentage)

Example 1: Contract price without VAT is Tk. 200 and applicable VAT is 10%.

So, VAT amount, V = Ci * v /100 = 200 * 10/100 = 20 Tk.

Example 2: Contract price including VAT is Tk. 200 and applicable VAT is 10%.

So, VAT amount, V = Ct * v / (100+v) = 200 * 10/(100+10) = 18.18 Tk.

If you are interested to learn how the above two formulae are derived then read below explanation.

Here the base value for VAT calculation i.e. price excluding VAT is known. So we can calculate VAT amount straight forward by calculating percentage on this amount as explained below:

VAT Formula #1:

V = Ci * v /100

Where,

V = VAT amount

Ci = Contract / sale price excluding VAT but including IT

v = VAT rate (percentage)

Here the base value for VAT calculation i.e. price excluding VAT is not known. Let's try to derive a formula for this situation.

Given,

Total Contract price including VAT and IT = Ct,

VAT rate (%) = v,

Let,

Amount of VAT = V,

Thus, Contract price excluding VAT, Ci = Ct - V

We know:

V = Ci * v /100 <----

=> V = (Ct - V)* v/100

=> 100V = v*Ct - v*V

=> 100V + v*V = v*Ct

=> (100+v)V = v*Ct

=> V = v*Ct / (100+v)

So we get following formula for situation #2 where total contract price is given.

VAT Formula #2:

V = Ct * v / (100+v)

Where,

V = VAT amount

Ct = Total Contract price including VAT and IT

v = VAT rate (percentage)

Many of us do mistakes by applying vate rate on the total contract amount which is wrong.

Still have confusions? Check VAT calculation using the VAT calculator of NBR to check accuracy of the above mentioned two VAT calculation formulae.

Still have confusions? Check VAT calculation using the VAT calculator of NBR to check accuracy of the above mentioned two VAT calculation formulae.

Share on Twitter