Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: ACCOUNTING STANDARD :: TDS :: empanelment :: ACCOUNTING STANDARDS :: ARTICLES ON INPUT TAX CREDIT IN VAT :: list of goods taxed at 4% :: due date for vat payment :: VAT Audit :: articles on VAT and GST in India :: Central Excise rule to resale the machines to a new company :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TAX RATES - GOODS TAXABLE @ 4% :: cpt :: VAT RATES :: form 3cd
VAT (Value Added Tax) »
 Shops cannot charge VAT on discounted items: Consumer forum
 Delhiites have to pay lowest taxes as AAP govt announces cuts on VAT on various items
 Tamil Nadu minister justifies VAT hike on fuel
 State Government urged to withdraw hike in VAT on petrol, diese
 High VAT may encourage illegal trading
 Delhi budget unlikely to have any new tax proposals this year
 Date for filing quarterly VAT returns extended
 Framing of Central Assessments - Dated 2-2-2017 - VAT - Delhi
 CENVAT Credit (Amendment) Rules, 2017
 VAT to Give Way to Consumption Tax
 Import stage VAT under new VAT law

Did You Know/VAT was introduced to ensure clarity in tax collection
March, 17th 2012

Value added tax, or VAT, was introduced from 1 April 2005 to replace the central sales tax in a phased manner. However, while VAT has become applicable, sales tax of 2% also remains.


VAT is an indirect tax which is paid on the consumption of goods. Such a tax is basically collected from the final consumer, but not directly by the government, rather through an intermediary such as a retailer. The tax is added at every stage of value addition or change in product characteristics from production to consumption. This means that at every step when the basic raw material changes form, VAT is applicable. Thus, it is another form of sales tax but is collected at every stage of value addition in the product.

Lets say you buy a packet of biscuits on which VAT is 10%; so a price of Rs. 22 includes a VAT of Rs. 2. The tax collection starts at the beginning. When the biscuit maker buys the refined wheat from the supplier, he pays 10% VAT along with the price of the wheat. This amount of tax is collected by the supplier and given to the government.

Now the manufacturer sells the biscuit to the retailer and includes in the price a 10% VAT, which is paid by the retailer. The manufacturer will collect the tax and pay the difference (adjusting for the tax he has already paid to the wheat supplier) to the government. In the last step, the retailer will charge a 10% VAT from you when you buy the biscuit, the tax collected will be paid to the government after adjusting for the tax he has already paid to the manufacturer.


In case of simple sales tax, this entire amount is charged and collected at one point, but there was confusion as to which is the appropriate leg of the transaction to collect this tax. VAT was introduced to cut the confusion.

While there is no difference in the amount of total tax paid to the government or collected from you as the consumer, using VAT in place of sales tax ensures more clarity and efficiency in tax collection at various stages.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Privacy Policy

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions