Which one of the following is not a feature of 'Value Added Tax'?

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Question

Which one of the following is not a feature of 'Value Added Tax'?

Accepted Answer

Correct Answer: D — It is basically subject of the Central Government and State Governments are only facilitators (NOT a feature of VAT)Step-by-step Solution:Value Added Tax (VAT) — in the Indian context (before GST, 2017) — was a State subject, not a Central Government subject. VAT was introduced in India progressively by state governments (first introduced in Andhra Pradesh in 2005; most states adopted it by 2007–08). It replaced state-level Sales Tax.Option A — Multi-point destination-based system: This IS a feature of VAT. VAT is levied at multiple points in the production-distribution chain (multi-point), and it is a destination-based tax (collected in the state where final consumption occurs, not where production takes place). ✓ (Is a feature)Option B — Tax on value addition at each stage: This IS the defining feature of VAT. At each stage of production/distribution, tax is levied only on the VALUE ADDED at that stage (not on the total price). Input tax credit (ITC) allows businesses to deduct tax paid on inputs from tax collected on outputs — ensuring only the net value addition is taxed at each stage. ✓ (Is a feature)Option C — Tax ultimately borne by consumer: This IS a feature of VAT (and all indirect taxes). VAT is ultimately borne by the final consumer — businesses along the chain collect VAT, claim input tax credits, and remit the net to the government. The final consumer pays VAT with no credit to claim against. ✓ (Is a feature)Option D — Central Government subject; states are facilitators: This is NOT a feature of VAT. State VAT was a STATE subject — states legislated, administered, and collected their own VAT. The Central Government had its own CENVAT (Central Value Added Tax on manufactured goods — under Central Excise). State governments were NOT mere facilitators — they were the principal authorities for state VAT. This statement is factually wrong about VAT's governance structure. ✗ (NOT a feature = correct answer)Key Concept: GST (Goods and Services Tax, implemented July 1, 2017): Replaced both State VAT and Central CENVAT/Excise/Service Tax with a unified VAT-type tax; truly destination-based, comprehensive VAT covering goods and services; four-rate structure (5%, 12%, 18%, 28%) plus cess; CGST (Central) + SGST (State) for intra-state; IGST (Integrated) for inter-state; GST Council (chaired by Union Finance Minister, states participate) — cooperative federalism in taxation; Input Tax Credit (ITC) is the core mechanism ensuring the VAT nature of GST; GST Network (GSTN) is the technology backbone; India's GST is among the most complex in the world due to federal structure and multi-rate system.

Which one of the following is not a feature of 'Value Added Tax'?

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Which one of the following is not a feature of 'Value Added Tax'?

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More Questions from National Income – GDP, GNP, NNP & Measurement

Frequently Asked Questions