Question

Recently VAT was introduced in India. Choose the correct statement.

• A. VAT has replaced Sale Tax in all states of India
• B. VAT is charged in place of Sales Tax only in some states of India.
• C. VAT is charged in addition to Sales Tax in all states of India
• D. VAT is charged in addition to Sales Tax in some states of India.

Answer 1

The Correct Option is B

Step 1: Understand the question
The question asks about the introduction of VAT (Value Added Tax) in India and requires identifying the correct statement regarding its implementation. The correct option given is that VAT replaced Sales Tax only in some states of India.

Step 2: Background of VAT in India
VAT, or Value Added Tax, is a type of indirect tax levied at each stage of production and distribution, but only on the value added at that stage. It was introduced in India on 1 April 2005 to replace the traditional sales tax system that existed in different states. However, VAT was not adopted uniformly across the entire country on the same date. Different states introduced VAT at different times, while some initially resisted and continued with their old sales tax system.

Step 3: Why option (B) is correct
At the time of its introduction, VAT did not cover all of India. Some states, like Haryana, Delhi, Karnataka, and Maharashtra, adopted it early in April 2005. Other states delayed or opposed the move due to concerns over revenue loss and administrative changes. Hence, VAT replaced Sales Tax only in some states, not uniformly across the whole country.

Step 4: Final justification
Therefore, the correct statement reflects the partial and staggered implementation of VAT in India at the time of its introduction.

Final Answer: The correct option is (B) VAT is charged in place of Sales Tax only in some states of India.