INDIA BEFORE AND

AFTER VAT

GarimaKalpesh RathodPrasasthi TandonPooja KumariSachin KatudiaSushant VermaUdayan Sikdar

contentsDefinition of TAX.Types.India Before VAT.India After VAT.Pros Cons.Exemptions.Conclusion.

Definition of TAX.

A fee charged by a government on a product, income, activity.

Types.

Direct Taxes.Income Tax

Indirect Taxes.Sales TaxExcise DutyVAT(Modvat, Cenvat)

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.(Central)

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 customer.

Helps in development of domestic market through removal of trade barriers and simplification of indirect access.

ProsRemoves the defects of TAX credit

system and avoids the cascading effect.

Exports can be freed from domestic taxes.

Neutrality with minimum distortion in tax structure as there are few variations in tax rates and exemption from tax rates are very few.

ConsVAT is regressive.VAT is too difficult to operate

from the position of both the administration and Business.

VAT is inflationary.VAT favors Capital intensive firm.

ExemptionsLiquor, Lottery Tickets, Petrol,

Diesel, Aviation fuel and other motor spirits since their prices are not fully market determined.

ConclusionBenefit of VAT cannot be fully

enjoyed unless Sales TAX payment is stopped being levied.

No Uniformity in the rates of VAT over products.

Possibility of TAX evasion.

Your OpinionDo you think VAT increases Prices

now?Will Uniformity in rates of VAT

over different products benefit?