A raw materials producer sells their goods to a factory or wholesaler (this is your supplier). The raw materials producer pays VAT (to the government) on the sale (using the baked in profit they’ve made from the sale).
VAT? What is that?
Value-added tax (VAT) is a tax that is added onto a product at every point of sale.
At every stage of the supply chain, from production to the point of sale, VAT is paid by the user for the cost of the product, less any of the costs of materials used in the product that have already been taxed.