VAT: Value Added Tax

Introduction:

VAT or goods and service tax (GST) is a consumption tax (CT) leived on any value that is added to a product.

Meaning:

* It is a consumption tax because it is taken ultimately by the final consumer

* VAT is a general consumption tax assessed on the value added to goods and services

* It is not a charge on companies. It is charged as a % of price

* To avoid cascading effece which can have a snowballing effect on companies

Necessity of VAT in India:

* Eliminates cascading effect of TAX

* Encourages proper maintainence of accounts books

* Evasion of TAX is minimised

* Prices gets neutralised

* Increased revenue