Value Added Tax (VAT) was introduced in many states of India with effect from April 1, 2005 as a substitute for sales tax. This indirect form of tax is charged at each stage of sale and paid on value added to goods. Cascading price, lack of buoyancy, elasticity and transparency are some of the contributing factors for evasion. VAT minimizes cascading effect by giving input tax rebate while at the same time levying tax on value at each stage in the supply chain.
VAT, cascading effect, tax evasion
