VAT

By
DR.S.CECILIYA
 VALUE ADDED TAX-Basics
• Customs duty is levied on imported goods(all
goods). Excise duty is levied on manufactured
excisable goods (not an all goods –only on
excisable goods).
• Service Tax is levied on taxable services (not on
all services. Only on taxable services)
• Sales Tax is levied on sales of goods (on sales only
and not on goods).
• If the sales are intra-state sales, the tax is called
GST (General Sales Tax)then it was replaced by
VAT.
 • VAT= Tax on intra-state sales of goods.
(VAT is a state subject)
• In the VAT system, the levy is on the difference
between sale price and purchase price.
• VAT=Tax on value addition.
• Old name of VAT is MODVAT(Modified Value
Added Tax).
• VAT in Sales Tax= CENVAT in Central Excise
• The Tax Reforms Committee(1992) headed by
Dr.Raja J.Chelliah, a pragmatic economist
(especially in tax matters) suggested the
introduction of state level VAT.
 Merits of VAT
• VAT provides anti-cascading effect; hence
there is drop in sale price.
• Drop in sale price leads to hike in sales,
• Tax element should be clearly indicated in the
invoice.
• Method is simple.
VAT payable= Tax on sales(-) Tax on purchases.
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