Explanation:

Value added tax (VAT) was introduced  into the Indian taxation system from 1 April 2005. The VAT is a consumption tax that taxes the value added by businesses at each point in the production chain. It can apply to both manufactured goods and services. ... A sales tax and a VAT designed to raise equal amounts of revenue would raise the final price of purchases by roughly the same amount. To calculate the amount of VAT a consumer or business must pay, take the cost of the goods or service, and subtract any material costs previously taxed. ... The VAT paid at each sale point along the way represents 10% of the value added by the seller.