VAT
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.
A few states (Gujarat, Tamil Nadu, Rajasthan, Madhya Pradesh, Chhattisgarh, Jharkhand, Uttarakhand and Uttar Pradesh) opted to stay out of VAT taxation system during the initial introduction of VAT but adopted it later.
As of 2 June 2014, VAT has been implemented in all the states and union territories of India except Andaman and Nicobar Islands and Lakshadweep Island. The federal of India, on the basis of the resolution adopted in the conference of chief ministers on 16 November 1999, under the chairmanship of Assim Dasgupta, came out with a white paper on state-level VAT, which was released on 17 January 2005, by P. Chidambaram, the federal finance minister.
The paper consisted of three parts:- Part 1, justification of VAT and background
- Part 2, main design of VAT
- Part 3, related issues of effective implementation of VAT.
VAT was not to be mandatory for small dealers with a gross annual turnover of 5 lakh or less, but some states increased the threshold limit to 10 lakh. VAT was implemented in the most states from 1 April 2005.