19 November 2011
VAT is value added tax, which is applicable in local sales tax. (However in service tax/excise etc CENVAT is also used)
earlier there was only one point tax on sale, hence many businessmen were able to evade tax liability.
Now VAT is multi point tax where every seller has to pay tax, and in return he will get tax credit for tax paid by him on purchase. So this scheme will help to curb tax evasion.
Simply speaking, its tax on your value addition only.
VAT is a multi-point tax on value addition which is collected at different stages of sale with a provision for set-off for tax paid at the previous stage/tax paid on inputs.
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