As a result exports are zero rated while imports are charged with VAT. VAT applies on supplies made in relation to furtherance of economic activities. It identifies and tax economic contribution i.e. value addition. Thus VAT is restricted to business/economic activities and a result it is not imposed on activities of personal nature e.g. gifts for personal reasons or charitable activities with no commercial substance. The method of charging VAT at each stage of value addition is the invoice based credit method.
