Introduction of VAT : VAT was introduced into the Indian taxation system from 1 April 2005. Out of the 28 Indian states, eight did not introduce VAT at first instance including five states ruled by BJP. The VAT rate is between 5% to 20% allover India. Value-added taxation in India was introduced as an indirect value added tax (VAT) into the Indian taxation system from 1 April 2005. The existing General Sales Tax Laws were replaced with the Value Added Tax Act (2005) and associated VAT Rules Definition: The VAT is a consumption tax that taxes the value added by businesses at each point in the production chain. It applies to both manufactured goods. A business pays VAT on its purchase of inputs and collects it on its sales, whether those sales are to another business or the final consumer. VAT is also applicable on resale of goods. It is also known as consumption tax. It is a multi point sales tax with set off for tax paid on purchases. It is basically a tax on the value addition on the product. It is not charge on companies. It is charged as a percentage of its price. VAT Registration: The turnover limit for compulsory registration for businesses is INR 500,000, although this may vary by state. State VAT laws also specify monetary amounts of sales and/or purchases required for registration. Returns: VAT returns must be filed compulsorily and payments made either monthly or quarterly, based on the tax liability. Advantages: Easy to administer and transport No cascading effect Minimum exemptions Inputs are taxed only once Disadvantages: Have to maintain detailed records Inflation increases Increase investment VAT related terminologies: Output VAT : Amount received by a seller as a percentage of the gross sale price of goods or service. Input VAT : Amount paid by a buyer as a percentage of the gross purchase price for goods or service used in production. Zero rated : Transaction in which seller collects no output tax and the corresponding input tax is fully refundable. Exempt : Transactions in which the seller collects no output tax but the corresponding input tax is non refundable and absorbed by the seller. For more details visit us at : http://www.finmart.com/sr-vat-re...