Question

Q. With reference to Value Added Tax (VAT), consider the following statements:

Select the correct answer using the codes given below:

• A. 1 only
• B. 2 only
• C. 1 and 3 only
• D. 1, 2 and 3

Answer 1

The correct option is B 2 only

Explanation:

• Statement is incorrect: 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.
• Statement 2 is correct: The main aim behind the introduction of VAT was to eliminate the presence of double taxation and the cascading effect from the then existing sales tax structure.
• Statement 3 is incorrect: Each state has its own VAT laws for proper implementation and levying. Different states apply different VAT rates according to their implied laws.