Impact of value added taxation on indian

The book claims that although the implementation of a broad-based federal VAT was considered as the most desirable consumption tax for India since the early s, such a reform would involve serious problems for the finances of regional governments. Also, implementing VAT in India during the current economic reforms would have paradoxical dimensions for Indian federalism. On one hand, economic reforms have led to decentralization of expenditure responsibilities, which, in turn, demands more decentralization of revenue raising power if fiscal accountability is to be maintained.

Impact of value added taxation on indian

The Secondary Source of data has been used.

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Data analysis was performed with the use of stepwise regression analysis. Findings showed that Value Added Tax has statistically significant effect on revenue generation in India. The study recommends that if GST is introduced, the revenue base of the country will definitely increase.

The emphasis had been to simplify the central taxes within the frame work provided by the Tax Reform Committee. The attempts have been to broaden the base, lower the rate structure and simplify the administration. The attempt was made to rationalize customs duty in terms of lowering the peak and average tariff rates, and reduction in their dispersion, and of excise duties in terms of the coverage of MODVAT facilities to larger number of commodities and capital goods.

These reforms surely led to improvement in the structure of central taxes.

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With the reforms of central taxes, the focus was shifted to the reform of state taxes, particularly the sales tax. The past discussions pointed towards the need to transform the prevailing sales tax system into a consumption type Value Added Tax.

Inthis idea was put into practice through the introduction of MODVAT as a partial replacement to excise duties. Bythe scope of the tax was expanded.

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At the state level, efforts were made to bring the states together to agree for transforming their existing sales tax system to VAT system. This issue attracted considerable attention. Towards forgoing a consensus, the Union Finance Ministry appointed a Committee of State Finance Ministers from 10 different state governments to work out the rationalization measures and to achieve a co-coordinated structure of sales taxation in the states.

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Impact of value added taxation on indian

Peer Reviewed- Refereed International Publication available at http: The first major break through in the direction of tax reform came in the form of an agreement between Union Finance Ministers and the State Chief Ministers on November 16, The main objectives are: Implementation of floor rates within the existing sales tax regimes.

Elimination of the tax based industrial incentives for new and expanding industries. On the basis of the above objectives, Empowered Committee comprising of nine State Finance Ministers was constituted on 17th July to monitor the decisions taken in Chief Ministers Conference.

Empowered Committee decided to rationalize the further rate structure under VAT to 5 rates: Nil for certain goods.

What is a 'Value-Added Tax - VAT'

Central government has agreed to compensate the states for loss due to implementation of VAT. The target date for introduction of VAT was rescheduled in the meeting of Empowered Committee on June 18, with the new target set for April 1, During this period, the Empowered Committee constituted to monitor the transition to the new tax regime through sustained deliberations, and at last 16 states have agreed to introduce VAT from 1 st April It may be noted that the postponement of introduction of VAT from 1st April, to 1st April was due to various reasons such as divergent views on treatment of existing sales tax incentives already granted by states, treatment of Central Sales Tax under VAT, lack of commitment by central government at that time on compensating the states for loss in revenue etc.

The important reason for postponement was lack of preparedness by the states. After a lot of persuasion by central government, VAT was introduced from 1 st April In this part brief review of past studies relating to various aspects of sales tax reforms in India, concepts of value added tax, VAT in some other countries are presented.

The study presents the development of sales taxes and their various forms that exists in the country. It also discussed the objective criteria for the analysis like growth objective, equity consideration, administrative expediency and co-ordination.

The focus of the study was mainly to identify the revenue neutral VAT rate or rates for the center and the states within the broad frame of the recommended rate structure.The existing general sales tax laws were replaced with the Value Added Tax Act () and associated VAT rules.

A few states (Gujarat, Tamil Nadu, Rajasthan, Madhya Pradesh, Chhattisgarh, Jharkhand, Uttarakhand and Uttar Pradesh) opted to stay out of VAT taxation system during the initial introduction of VAT but adopted it later. The paper aims at presenting the importance of value added tax in the Indian society, its impact and the future prospect for product and service industry in India.

Value Added Tax (VAT) means the tax which is payable only on value-added. It is multi-point tax system but without the effect of double taxation.

Value is added to the products, which an organization buys from other organizations such as raw materials, partly finished goods etc.

Mutual Funds Taxation Rules – Capital Gains Tax Rates on MFs. Last updated: May 1, | by Sreekanth Reddy Comments. Goods and Services Tax free download Remaining Legislative Procedure: At present, the Central Government levies taxes on the manufacture of goods and the State Governments levy taxes on the sale of goods.

However, the issue is what the legal exemption actually is versus what many believe it to be. It is important to understand the actual legal exemption rather than characterising the issue by the instances of ‘cheating’.

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