The funny fact about the words VAT and MVAT is that they are nothing different. So, why the difference in names and what do they signify? The thing is simple. VAT is nothing but the VALUE ADDED TAX and is defined as:
• It is nothing other than the Sales Tax.
• VAT is a multi-point Sales Tax and is calculated at the different stages of production of a particular good. The good under production adds a certain amount of value at every stage of its production and the tax imposed on that value is known as the VAT.
• The tax which is paid by the dealer is subtracted from the payable tax at every point of the sale and the tax which is already paid.
VAT is synonymously used with Sales Tax.
So, what exactly is MVAT? It is the same thing and the abbreviation is used in the state of MAHARASHTRA. Thus MVAT is nothing but the VAT applied in the MAHARASHTRA. Thus in an attempt to define VAT in MAHARASHTRA, one need not do anything extra. Hence, there is no difference between VAT and MVAT.
Everything remains the same and the rules used in the calculation of VAT in other sates of India are also applied for Maharashtra. This the tax distribution and tax burden remains equitable even in the state of Maharashtra.
So, let us now look into the reasons for which the VAT or MVAT is essential:
• It leads to more equitable tax burden.
• Taxation becomes more transparent.
• Calculation of tax becomes simple and easy.
• VAT also avoids distortion in the economy as well as trade.