As sales Tax had been subject to malpractices and corruptions, the ValueAdded Tax (VAT) system was introduced in India with much expectations. The article analyzes the need for VAT in India by primarily focussing on the West Bengal VAT rules and laws. The author presents how the eligible registered dealer can claim the input tax credit on his purchase of taxable goods.

Before touching upon the main subject we would discuss the rationale behind, why Value-Added Tax (VAT) was brought in first place to replace Sales Tax. Commercial Tax on sales, which was collected before the introduction of VAT,
itself was a good, robust, well-designed legislature evolved over a period of time for collections of fair share of revenue on sales. However to get most out of a system, it is much dependent upon how it’s being implemented. In our country the level of corruption is very high and overshadows everything else. Thus, significant amount of sales have never been reported and governments have failed to correct lapses. It was a nexus between a corrupt department and the bad blood of the business community, which flourished at the cost of a good guy in trade. Thus over a period of time after all its attempts, the government realized that it was just not possible to correct the system in its present form. In the backdrop of this the legislature came up with the idea to introduce a new system where the burden of it would fall on the shoulders of subjects who are liable to tax. Sales Tax has been scrapped. Single-point tax is the best system that fits on the canon of a good tax system in terms of economic efficiency, administrative simplicity, transparency and flexibility. Moreover, in the earlier system many states like Maharashtra, Tamil Nadu and West Bengalwere practicing input tax credit in some form or the other.

One can understand this by a simple example, say, in a school there are students who have similarity in background and other resources but the students who are keen about their studies, do perform better than others. The success of any legislature would depend much on its implementation beside its form and content. It can be highlighted and seen that a student having modest resources, from an ordinary background and from a general school put outstanding performance leaving many other students having resources, studying in big schools, as later ones are modest in using resources at their disposal. In the similar way, good legislature if implemented in full thrust could producethe desired results than excellent legislature being poorly implemented.

The Accounting World Magazine, Value-Added Tax, VAT, Business Community, Taxpayer Identification Number, TIN, VAT System, Input Tax Credit, ITC, Capital Goods, Banking System, Departmental Stores, Software Firms, Sofware Packages, Non-taxable Goods.