UPSC Prelims PYQ 2011: Feature Not of Value Added Tax (VAT)

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

1. It is a multi-point destination-based system of taxation.
2. It is a tax levied on value addition at each stage of transaction in the production distribution chain.
3. It is a tax on the final consumption of goods or services and must ultimately be borne by the consumer.
4. It is basically a subject of the Central Government, and the State Governments are only a facilitator for its successful implementation.

Explanation

Option (d) is the correct answer

• Value Added Tax (VAT) is a multi-point, destination-based tax levied on the value addition at each stage of the production and distribution chain. VAT is ultimately borne by the consumer, as it is included in the final price of goods and services. VAT was not exclusively under state government jurisdiction; it was replaced by the Goods and Services Tax (GST), which unified taxation across both Central and State governments. Under GST, the previous taxes imposed on goods and services by both levels of government were merged into a single tax structure.
• Current Status of VAT in India: Still applicable on certain goods like petroleum products (petrol, diesel, aviation fuel), alcoholic beverages, which are outside the GST framework.

Answer: (d) It is basically a subject of the Central Government, and the State Governments are only a facilitator for its successful implementation | Difficulty Level: Easy