Which one of the following is not a feature of “Value Added Tax”?

[UPSC Civil Services Exam – 2011 Prelims]

(a) It is a multi point destination based system of taxation.

(b) It is a tax levied on value addition at each stage of transaction in the production-distribution chain.

(c) It is a tax on final consumption of goods or services and must ultimately be borne by consumer.

(d) It is basically subject of the central government and state government are merely facilitator for its successful implementation.

Answer: (d)        

Explanation:

Value-added tax (VAT):

• It is a type of indirect tax levied on goods and services for value-added at every point of the production or distribution cycle, starting from raw materials and going all the way to the final retail purchase.
• VAT was introduced on April 1, 2005.
• VAT, being a ‘tax on sale or purchase of goods within a State’ is a State Subject by virtue of Entry 54 of State List of the Seventh Schedule of the Constitution of India. Since VAT/Sales tax is a State subject, the Central Government has been playing the role of a facilitator for the successful implementation of VAT. Hence, option 4 is not correct.
• The main aim behind the introduction of VAT was to eliminate the presence of double taxation and the cascading effect of the then-existing sales tax structure.
• To completely eliminate the cascading effect of taxes and to make the indirect tax structure simpler, the union government introduced the Goods and Services Tax (GST) in July 2017.
• Though GST replaced VAT on most goods, some goods are still not covered under the new regime. VAT continues to be the tax levied on such goods.