Wednesday, August 15, 2012

History of Value Added Tax (VAT)


VAT was initiated first in France in mid-1950’s, then in European countries in 1960’s and subsequently introduced in about 130 countries, including several federal countries. In Asia, it has been introduced by a large number of countries from China to Sri Lanka.
Even in India, there has been a VAT system introduced by the Government of India for about last ten years in respect of Central excise duties.

Value added tax is an indirect tax charged on sale of goods. Before the implementation of Value Added Tax, Sales tax was charged on sales. Sales tax was levied at first point of sale, and the resellers did not contribute to the Government. Government was losing huge revenue due to this system. Finally Government introduced VAT on 1st April 2005, with the motto of uniformity in tax structure and to reduce the evasion of tax.


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