Value Added Tax (VAT) is a general consumption tax assessed on the value added to goods.
It is a general tax that applies, in principle, to all commercial activities involving the production and distribution of goods. It is a consumption tax because it is borne ultimately by the final consumer. In India, it is the replacement of existing sales tax structure; the only difference being the manner of levy.
It is a multi-stage tax, levied only on value added at each stage in the chain of production of goods with the provision of a set-off for the tax paid at earlier stages in the chain. It is assumed that due to cross-checking in a multi-staged tax, tax evasion will be checked, resulting in higher revenues to the government. VAT being state level tax, is controlled and administered by State Government, through various states level laws, rules and regulations.
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