The Value Added Tax (VAT) is imposed on any kind of business activity in a state. There are different amounts of VAT imposed on different objects. For example, medicines, raw materials for agriculture and industrial purposes, and capital goods are taxed at four percent, while other articles have a 12.5 percent VAT imposed on them. Gold, platinum and other precious metals have a mere one percent VAT levied on them.
These taxes are however, negotiable, because when the tea industry was facing production difficulties; all tea producing states were given the option of levying either a 12.5 percent or a four percent VAT.
VAT, in India, is imposed only on money making articles and so resources such as diesel or petrol are exempt from this tax. Nevertheless certain state in India, do not uphold this practice. Delhi, for instance, has levied a twenty percent VAT on diesel and a 12.5 percent VAT on petrol, which is even higher than their sales taxes.
Discussions are still going on as to the tax on food grains. Some feel it should be exempt from taxes, while others feel it should have at least a four percent tax and still others oppose both these suggestions. Certain products such as sugar, textiles and tobacco were exempt from VAT for a year but now are taxed as per the state norms. The Indian VAT Panel recently revised the entrance fees for traders, lowering the prices and allowing them to pay a combined VAT rate of one percent only.