|THE VALUE ADDED TAX ACT, 2003.
VAT is a system whereby a taxable commodity is taxed at every point of
sale within the state from the stage of production or manufacture
within the state, or from the stage of first sale within the state
after import from outside the state, to the stage of sale to the
consumer, subject to a threshold limit. But one redeeming feature of
the system is that at every subsequent point of sale after the first
sale within the state, tax is payable only on the value addition. Only
a copule of tax rates are applicable in VAT. The system is very
transparent as all transactions take place through invoices showing tax
separately; tax is not merged with the sale price and so there is no
cascading effect of tax in the subsequent points of sales. The
retailers having the gross turnover upto a certain prescribed level
shall have the option to pay presumptive tax at a certain percentage of
their taxable turnover.