Main source of public finance are direct tax and indirect tax. In direct tax, we have already discussed income tax. Now, we are explaining value added tax. It is the revenue source of the state. Value added tax is tax which is chargeable on the value added in price. It means when a buyer buys any commodity, he has to pay VAT input and after this when he sells the same commodity by adding different charges, receives VAT output on the sale of commodities. Now, he has to pay the tax to state govt. up to the excess of VAT output over VAT input.
VAT payable to Govt. = VAT output - VAT input
The Concept of VAT is a very popular system of Taxation which emerged in European Countries. The VAT system is adopted by most of the countries to bring about user-convenience and transparency in the entire system of taxation. The working system of VAT is simple to follow, implement and administer.
VAT rates in India
Following is the list of VAT rates in India. But now some states have amended the rates of VAT.