India Before VAT.
Modvat introduced in 1986. (Modified)
It was introduced to give some relief to
the final manufacturers of goods on
Excise Duties borne by their suppliers.
Cenvat introduced in 2000.
Simplified Tax System.
Removes Cascading effect of TAX.
Additional types of goods introduced.
India After VAT.
1st April 2005.
Similar to sales tax.
Tax on estimated market value at stages of
manufacturing, distribution and passing to
Helps in development of domestic market
through removal of trade barriers and
simplification of indirect access.
Removes the defects of TAX credit
system and avoids the cascading effect.
Exports can be freed from domestic
Neutrality with minimum distortion in tax
structure as there are few variations in tax
rates and exemption from tax rates are
VAT is too difficult to operate from the
position of both the administration and
VAT is inflationary.
VAT favors Capital intensive firm.
Liquor, Lottery Tickets, Petrol, Diesel,
Aviation fuel and other motor spirits
since their prices are not fully market
Benefit of VAT cannot be fully enjoyed
unless Sales TAX payment is stopped
No Uniformity in the rates of VAT over
Possibility of TAX evasion.
Do you think VAT increases Prices
Will Uniformity in rates of VAT over
different products benefit?