a study on impact of value added tax (vat) implementation in india

A STUDY ON IMPACT OF VALUE ADDED TAX (VAT)IMPLEMENTATION IN INDIADR.A.JAYAKUMAR., Ph.DAssociate Professor and Former Controller of ExaminationsDepartment of commercePeriyar UniversitySalem636011.e.mail: hodcom@yahoo.com1

ABSTRACTValue added tax (VAT) is a type of indirect tax that is imposed on goods andservices. Sometimes, when the government operates on a budget surplus or wantsto increase its revenue in order to finance its budget deficit. A question that arises iswhether value added tax has been a boon or misery for a developing country likeIndia. Around 136 countries in Asia have recognized the importance of value addedtax. In one of the most large scale reforms of the country’s public finances in over thepast 50 years, India has finally agreed the launch of its much delayed value addedtax from 1st April, 2005 at a rate of 12.5%. The tax rate is fixed by meeting ofdifferent state level Finance Minister, in New Delhi, designed to make accountingmore transparent, to cut short trade barriers and boost tax revenues. According toChanakya, “A government should tax its people like a shepherd shears a flock or abee gets nectar from a flower”. The tax is levied not only on products but servicesthat is the source of revenue for the government to plan for development activities inthe country. Since, India is a developing country, the main source for revenue isgenerated through tax levied on the individual on the purchase of goods or services.The government imposes taxes and duty charges on the fellow people for fulfillingthe infrastructural, technological, entrepreneurial demand of the country. Whetherthe imposition of high tax on the society is favorable or unfavorable in the presentscenario to meet the technological and infrastructural demand? It has been identifiedthat rural people are charged more tax than urban people due to subsidized rateprovided to them in food products, transportation, electricity, water etc. for thesefacilities they are charged indirectly from their source of income like agricultural andallied activities. The question that arises is: do value added taxes promote prosperityand well being for the common men? VAT is omnipresent in all goods and servicesprovided to the consumer. The paper aims at presenting the importance of valueadded tax in the Indian society, its impact and the future prospect for product andservice industry in India. The data collected is secondary based from thegovernmental publications and standard for chartered accountants.Keywords: Value added taxes levied, socio-economic effects, implementations oftax, Indian society, and calculation of value added taxes.2

1. INTRODUCTIONIndirect tax system plays an important role in the economic development of acountry by influencing the rate of production and consumption. The Government ofIndia has after committing to the World Trade Organization (WTO) regime, decidedto modernize and streamline its indirect taxation, in the light of the experience ofother WTO member countries. Value Added Tax (VAT) means the tax which ispayable only on value-added. It is multi-point tax system but without the effect ofdouble taxation. Value is added to the products, which an organisation buys fromother organisations such as raw materials, partly finished goods etc. After buying theorganisation applies its own labour and machine to manufacture the final products.VAT is a tax, which is imposed at every stage of production ie., from production levelto retail level. Under VAT tax is calculated on value Added where value added is thedifference between sales value and purchase value. The VAT as a system of tax,conceptually, has been of great interest among the early writers in public finance. Inthis research, project researcher try to explain the concept of VAT, their procedures,challenges among the Indian environment and opportunities, which are availableunder this regime. Initially, all states were to move to VAT system by 2000, butadministrative problems and concern over the revenue implications of the changedelayed the scheduled implementation. It was postponed five times beforeimplementation. In fact, introduction of a full fledged VAT in India seem to presentnumerous administrative and constitutional difficulties, including the vexed questionof Union-State relations. In addition to this, implementing VAT in India in context ofeconomic reforms has paradoxical dimensions. On one hand economic reforms haveled to more decentralization of expenditure responsibilities which in turn demandsmore decentralization of revenue raising powers if fiscal accountability is to bemaintained. But on the other hand, the process of implementation of VAT can leadnot only to revenue loss for the states but can also steal away the states‟ autonomyindicating more centralization. Thus, the need is to develop such a „Federal FriendlyModel‟ of VAT (along with a suitable compensation package) that can beimplemented in India without compromising federal principles.2. STATEMENT OF THE PROBLEMIn today‟s world of rapidly changing technology, wholesale trade firms areessential to the economy, by channel of distribution. To meet this changingenvironment, the wholesalers sell the products to be used primarily for resale or forindustrial use with the current Value Added Tax scheme. The <strong>study</strong> is focused onimpact of value added among the wholesalers, Retailers, chartered accountant, Taxofficials and consumers in India. The common objective of Value Added Tax is tosimplify tax structure, to create uniform common market within the country which willbring down prices that would enable the producers of goods to reduce costs, facecompetition from abroad and to increase exports. Value Added Tax will helpcommon people, traders and also the government.3

3. OBJECTIVES OF THE STUDY1. To identify the characteristic features of VAT and Implementation domain.2. To analyze the perceptions of Wholesalers, Retailers, Chartered Accountant,Tax Officials and Consumers regarding VAT Implementation.3. To determine the impact of VAT on satisfaction over the marketers as well asconsumers.4. To identify the Problems and Prospects in the lacuna of Governmental andImplementation domain.4. RESEARCH METHODOLOGY4.1 Sampling Plan and Data CollectionThe <strong>study</strong> is based on both primary and secondary data. The primary data iscollected from the Tax Officials, Chartered Accountants, Wholesalers, Retailers andConsumers. The questionnaire comprises three broad categories namely businessprofile, tax implementation stage, tax output stage and its impact over marketers andconsumers. The secondary data must be studied in the form of VAT collection forboth central and state governments from the date of implementation. It is better tocollect the wide responses from the four major metro and cosmopolitan cities. TheConvenient Random Sampling technique is exploited to obtain the responses fromthe required domains of VAT. A sample size of 409 respondents is found useablefor completion of the project. Frequency Distribution to determine the demograpicfactors and other variables to classify the perceptions regarding VATimplementation.4.2 Analysis of data and tools1. Factor Analysis followed by Cluster to reduce the number of variables intopredominant factors and to classify the perceptions regarding VATimplementation.2. A Parametric Approach through T-Test to determine the significant differenceamong the categorical variables. This will be useful in obtaining the widerange of perceptions from different domains.3. GLM (Generalized Linear Model) with both Univariate and Multivariate methodor indispensable in explaining in influence of independent variable ondependent variables problems and prospects of VAT implementation.4. Sum, Average, Standard Deviation and percentage to determine the variablesregarding Tamil Nadu (2007-2008, 2008-2009) and Karnataka (2006-2007,2007-2008 and 2008- 2009) details from Commercial tax Department afterVAT implementation.4

5. LIMITATIONS OF THE STUDY1. The <strong>study</strong> was restricted to Tamil Nadu and Karnataka only.2. Respondent‟s views and opinion may hold good for the time being and mayvary in the future.3. After Implementation of Value added tax data only taken for this <strong>study</strong> forTamil Nadu (2007-2008 and 2008-2009) and Karnataka (2006-2007, 2007-2008 and 2008-2009).6. REVIEW OF LITERATUREGurumurthi.S (1999) in his <strong>study</strong> outlined the experience gained in several federaleconomies, irrespective of the fact whether they are developed or developing, hasestablished fairly beyond doubt the undesirability of subjecting commodity taxation totwo levels, the federal and provincial, particularly in the context of introducing theVAT. While it is considered necessary to entrust the entire field of commoditytaxation to the national government which is best equipped to implement the VAT,the redistribution of the powers of taxation between the central/federal governmentand the states will depend on the situation and circumstances prevailing in eachcountry and that no generalization may be possible with regard to assignment ofspecific taxes to the states. International experience has shown that both personaland corporate income taxes are good candidates for partial assignment, particularlyin large federations but the same cannot be said about a tax like the one on naturalresources. Similarly, while property taxes have been traditionally assigned only tothe sub national governments, the system is somewhat different in Brazil, whereurban property is taxed at the municipal level, while the federal government leviesand administers the tax on rural property. Therefore it may be necessary for eachfederal country to evolve its own system by applying the above principles.Sukumar Mukhopadhyay (2001) in his <strong>study</strong> neutrality of VAT is no great virtue,that cascading effect can be removed zero-rating can be achieved by alternativemethods, that VAT does not boost exports, we should reconsider the adoption ofVAT even by promising a subsidy is an “ad hoc stepping stone to doom”. Genuinetax reforms are (a) three rates of duty in Central Excise, (b) three rates in retail salestax, (c) reduction in exemptions drastically in excise and sales tax, (d) uniformity ofsales tax floor rates, (e) reduction and ultimate removal of CST, (g) origin-basedsales tax for inter-state sales, (h) giving more service tax to states by commonconsent, and (i) introduction of a proper audit set up. All this will constitute a muchbetter reform.Sukumar Mukhopadhyay (2003) in his <strong>study</strong> (a) VAT is not the best form ofcontention tax, especially in a development economy; (b) It is not suited for Indianfederal. (c) An imperfect VAT would not serve the purpose for which VAT is betterintroduced; and (d) a better choice would be to combination of reformed CENVATsales tax with uniform rates in all reduction in exemption CST.5

K.Narayana (2005) in his <strong>study</strong> the state empower committee in India is planning tointroduce VAT system at state level from 1 st April 2005. As many as 21 states havereiterated their commitment to introduce value added tax (VAT) to replace sales taxfrom 1 st April 2005. The remaining states i.e., U.P., tamilnadu and five other BJPruled states have expressed their apprehension about the efficacy and revenue lossby introducing VAT. The VAT system of taxation does not encourage verticalintegration of firms as it is independent of number of stages in the production anddistribution channel. The experiences of many developing countries have shownthat if properly designed and implemented the VAT may prove a better resourcesmobilizer than the present sales tax systems. The apprehensions of the 7 states areillogical and political rather than genuine economic reason.Dr.S.B.Akash and Dr.K.Harishkumar (2006) in their <strong>study</strong> credit to recover the taxpaid on their business inputs. As a result, the system is an effect applying tax only tothe Value Added by each vendor. Since, only the tax that does not refund is the taximposed on final consumption the tax is equivalent to the retail sales tax where valueand purchase value. He concludes VAT is not burden to the manufacturer and itfacilitates concession to manufacturer and it facilitates concession to manufacturer inan easier manner. The successes of value added system fully depends upon properplanning and preparation, sound accounting practices, systematic organizationalaudit, fully acceptance of people, trained manpower, sound ethical businesspractices in business and ethical government representatives.7. THE IMPACT OF VAT IN INDIAVAT is most certainly a more transparent and accurate system of taxation. Theexisting sales tax structure allows for double taxation thereby cascading the taxburden. For example, before a commodity is produced, inputs are first taxed, theproduced commodity is then taxed and finally at the time of sale, the entirecommodity is taxed once again. By taxing the commodity multiple times, it has ineffect increased the cost of the goods and therefore the price the end consumer willpay for it. The transaction chain under VAT assuming that a profit of Rs 10 isretained during each sale.TABLE NO.1VAT CHAIN FOR SALESALE 'A' OFCHENNAI@ Rs. 100/-„B‟ OFBANGALORESALE @RS.114„C‟ OF BANGALORESALE @RS.124/-„D‟ OFBANGALORESALE@ Rs. 134/-CONSUMER INBANGALORE6

TABLE NO.2TAX IMPLICATION UNDER VALUE ADDED TAX ACTSellerBuyerSellingPrice(ExcludingTax)TaxRateA B 100 4%CSTB C 114 12.5%VATC D 124 12.5%VATD Consumer 134 12.5%VATTotal to Govt.Invoicevalue(InclTax)TaxPayableTaxCreditNetTaxOutflow104 4 0 4.00128.25 14.25 0* 14.25139.50 15.50 14.25 1.25150.75 16.75 15.50 1.25VATCST16.754.00*Note: CST Paid cannot be claimed for credit. CST is assumed to remain the samethough it could to be reduced to 2% when VAT is introduced and eventuallyphased out.VAT can be considered as a Multi-Point Sales Tax with set-off for tax paid onpurchases (inputs) and capital goods. What this means is that dealers can actuallydeduct the amount of tax paid by him for purchase from the tax collected on sales,thereby paying just the balance amount to the Government.8. IMPACT OF VAT IMPLEMENTATION IN KARNATAKAIn Karnataka the growth of revenue for the month of April and May 2005 hasbeen impressive – the growth in registration of new dealers of about 20% under VAThas led to enhanced revenue for the state. The state‟s performance is quite abovethe average growth of 12 per cent in tax collections recorded by 21 states whichswitched over to the VAT regime from April 1 this year. According to the commercialtaxes department, the state collected Rs.901.36 Crore for the month of June thisyear compared to Rs.741.6 Crore for the same month last fiscal. According to theprovisional figures, the department has collected Rs.2,758 Crore in the first quarter(April-June), compared to Rs.2,161 Crore during the same period last year. VAT hascompletely eliminated the problem of inter-state smuggling of rubber. Earlier, thehigher purchase tax had induced a great deal of rubber smuggling into neighboringstates such as Tamil nadu and Karnataka.7

9. VAT SYSTEM IN INDIAIn India there are four rates of taxes under VAT:Zero Rate: Unprocessed Agricultural Goods and Export Items;One Percent Rate: Gold, Silver, Precious and Semiprecious Stones;Four Percent Rate: Basic Necessities, Capital Goods, Industrial and AgriculturalInputs, AED (Additional Duties of Excise) items like sugar, textiles and tobaccoproducts.A uniform median rate of 12.5 % would be applied to all commodities (about425 items). Certain items like Aviation Turbine Fuel (ATF), certain petroleumproducts etc. will be kept outside the VAT regime. Rates applicable to scrap andobsolete items will be the same as for the original item, at the time of disposal. Mostessential commodities are exempt from VAT or fall under the four percent category.The VAT rates will be uniform in all states across the country. The same set of goodswill be charged at the same rates in all the states. All business transaction carried onwithin a state by individual, partnerships, companies etc. will be covered by VAT.There would be a level of turnover above which registration would be compulsoryunder VAT. Only registered sellers and buyers would be able to claim tax set-offs forinputs. Unification of all taxes under VAT may result in revenue losses for the states.To ensure least disruption in the process of transition from current system to VAT,the central government has assured the states of 100% compensation for possiblerevenue loss in the first year, and the rate of 75% and 50% for the next two yearsrespectively. To smoothen the road to VAT, the government established anEmpowered Committee of state finance ministers to monitor and decide the policyguidelines for VAT. A Task Force was also constituted for early implementation ofVAT. A model VAT Law was also prepared and circulated among all the states. Thiswas done to ensure that VAT legislation of all the states and all the U.T.'s havecommon policies and procedures. The original dateline for implementation for VAT inIndia was 1 st April, 2003 . But this could not be met since the states had not broughtthe required legislation. So finally VAT was implemented in 22 states from 1 st April2005.10. VARIANTS (FORM) OF VATThe difference between sales proceeds and cost of materials purchased fromother firms the base of VAT for any firm, where purchases includes Raw material, Semi-Raw Material, supplied used in the process of manufactures and handling, finishinggoods ready for resale, machinery equipments and other capital goods. Due todifference in treatment accorded to capital goods, there are four varieties of VAT:a) Gross Product type (GVAT) - In this type only purchase cost of rawmaterials is allowed as deduction from sales. No deduction is allowed in respect ofcapital expenditure and this encourage tax avoidance by classifying CapitalExpenditure and Revenue Expenditure .The limitations of this type of VAT is thatcapital goods carry a heavier tax burden, as they are taxed twice. Symbolically it canbe presented as:GVAT = C + I = W + P + D8

Where C is Consumption, I is Investment and W,P and C are Wages, Profits(after depreciation) and Depreciation, respectively.b) Income type (IVAT) - Here both purchase cost of raw material anddepreciation will be allowed as deduction from sales. Symbolically it can bepresented as:IV A T=C+I.D=W+Pc) Wages type (WVAT) - This wage type VAT belongs to capital exemptiontype of Value Added Taxes .It exempts either income from value added in producingthe capital goods .It is also termed as investment earnings inclusion type of VAT.The important limitations of this type of VAT are that labour alone has to bear theentire burden of tax because of its regressively. Symbolically it can be presented as:Yf-p= C+1-D-P=WWhere Yf = Net national income as a reward to factors of productiond) Consumption type (CVAT) - In this type of case all business purchaseincluding capital items are deducted in order to determine value added. Consumptiontype VAT is very popular and is adopted by most of the countries due to the followingreasons: (1) It makes no clearance between capital intensive and labour intensiveactivities. (2) By making classification between capital goods purchases and revenuepurchase tax avoidance can be avoided.(3) On account of credit methodadministration control becomes easy and quick. (4) Tax burden is always at the finalstage e.g. at the consumption stage. Symbolically it can be presented as:CVAT=W+P+D.I11. PROBLEMS OF IMPLEMENTATION OF VALUE ADDED TAXIN INDIAIn this <strong>study</strong> it is found that there are number of problems to introduce ValueAdded Tax on commodities in different states in India, but in this paper only majorproblems have been taken which are facing by different states for imposing of VAT,as follows: Billing: The main problem of VAT is billing because billing is essential fortraders to get the rebate on inputs. Without billing it is difficult to get rebate oninputs .The billing of the commodities must be a separate entry of basic priceand sales tax, so therefore traders gets the rebates but it is very difficult forthe traders to pass the separate entry of basic price and sales tax. Lack of Uniformity: In India there are number of state which had alreadyimplemented VAT, but some state are not agreed to impose VAT in theirstate. In this situation it is very difficult for inter- state transactions of thecommodities, because those states, which are not implementing, VAT in theirstate they prefer to buy goods from those state that are not implementingVAT.9

Concession for New Industry: Central Government announced concessionfor new Industries, which are to be established in rural areas. Afterestablishment of industries in rural areas government does not given anyconcession for such an industries. Practically government does not make anyprovision for concession of such an industry. Government announcedconcession for new industries only in Air not in practically. Number of Taxes imposed by the Government: The main problem of ValueAdded Tax are other taxes which are imposed by theStateGovernment due to economic problems of the state. Although traders areready to pay VAT but they are having demand that government shouldremove other taxes i.e. Entry tax, Octori, Toll tax, Local body tax etc. Lack of infrastructure facilities: In VAT billing is essential for the tradersbut it is difficult to maintain the infrastructure, computers, etc. facilities for thesame. In rural areas and even in urban areas do not have such sufficientinfrastructure facilities because India is a developing country and have ascarcity of finance and technology etc. Dealing in Variety of Goods: Most of the traders in India deals in variety ofgoods in their shops. Different commodity has different VAT rates. In thatsituation it is very difficult for a traders to maintain billing on VAT on theirgoods, for example a trader deals consumables items as well as durableitems in their shop, a consumer purchase one item of both the Variety of boththe items have separate rate of VAT in that situation it is very difficult in billingof VAT.12. EVALUATION OF VALUE ADDED TAX IN INDIAValue Added Tax is a tax on consumption. It is a multipoint levy collected ininstallments at each stage of production and distribution .The final and total burdenof this tax is borne by the domestic consumers of goods and services. Being a taxon domestic consumption on VAT is charged on goods exported from the country.Value Added Tax is levied on the sellers of goods and services based onvalue added by their respective units. The base for VAT is determined by Valueadded at a particular stage of production or distributions .In other words inputs of afirm are not taxed at each point the firm is reimbursed the tax which it has alreadypaid at the time of purchasing the inputs, thus there is no cascading effect. Indirect system plays an important role in the economic development of acountry by influencing the rate of production and consumption. TheGovernment of India has after committing to the World Trade Organisation(WTO) regime, decided to modernize and streamline its indirect taxation, inthe light of the experience of other WTO member countries. The governmenthas availed of the services of the international management-consulting firmAuthur Andersen for drafting of Rules, Procedures and Forms for introductionof VAT. Value Added Tax is prevalent in over 120 countries .In India,introduction of VAT would be a historic reforms of the domestic trade taxsystem. It is expected to facilitate the State and Union Territories to transitsuccessfully from the Sellers, while sales tax system to a modern domestictax system.10

13. EFFECTIVENESS OF VAT ON CONSUMERSPrice of goods will fall as there will be no tax on tax. In some cases, the price ofsome products will godown while in a few cases it may go up marginally. Under VATit is the customer who pays the total VAT. Example for Calculation of VAT (12.5% TAXABLE) Selling price of Manufactures – Rs.10, 000 Profit of wholesaler – Rs. 2,000 Profit of Retailer – Rs. 2,400 VAT paid at all stages – Rs.1,800 Final consumer price – Rs.16,200.TABLE NO.3CALCULATION OF VATPARTICULARS MANUFACTURERS WHOLESALERS RETAILERS CONSUMERPrice payable Nil Rs.11,250(-) Rs.13,500(-) Rs.16,200VATrecoverableNil Rs.1,250(-) Rs.1,500(-) NilNet cost Nil Rs.10,000(-) Rs.12,000(-) NilProfit Nil Rs.2,000 Rs.2,400 NilNet selling price Rs.10,000 Rs.12,000 Rs.14,400 NilVAT charged Rs.1,250 Rs.1,500 Rs.1800 NilTOTAL RS.11,250 RS.13,500 RS.16,200 NILT-TESTThe respondents are requested to express their perception about implicationof VAT and its influence over the marketing and its business activity. Theseperceptions are identified through different characteristics effects and optimisticimpact on business establishment. The consumers and marketers expressed theirperception in likert‟s five point scale which range from strongly disagree. In themethodology it has been noted that 5 is assigned to strongly agreeableness and onestrongly disagreeableness. In order to underpin the exact perceptions of themarketers as well as properties of business establishments a parametric t-test isapplied and following results are obtained. In this test 3 is considered as hypotheticmean or the test value because it is the center of the likert‟s 5 point scale.Opinion on Implementation of VATVAT Implementation is an indispensable phenomenon to give mutual benefit tothe Consumers, Retailers, Wholesalers, chartered accountant and tax officials. Theapplication of t-test exactly ascertain the opinion of implementation of VAT onConsumers, Retailers Wholesalers, Chartered accountant and Tax officials. Thefollowing are the results of the t-test.11

NMeanStd.DeviationStd. ErrorMeanT (lower)Sig. (2-ailed(lower)Table NO. 4One-Sample Statistics for Opinion on implementation of VATTax Evasion 409 3.7115 1.02177 .05052 14.082 .000Transparency 409 3.5844 .90929 .04496 12.997 .000Improved Exports 409 3.9511 .78750 .03894 24.425 .000Government Profits 409 3.7873 1.03670 .05126 15.358 .000Material Cost 409 4.0416 .89154 .04408 23.627 .000Response towardsVAT409 4.0342 .84238 .04165 24.830 .000Difficulties arefound in theinstruction of VATsystem than salestax409 3.9584 .73480 .03633 26.379 .000Inflation 409 3.8411 1.02979 .05092 16.518 .000Revenue Growth 409 3.1345 1.19804 .05924 2.270 .024Tax aspects 409 3.3447 1.13801 .05627 6.126 .000sales tax 409 3.5012 1.25660 .06213 8.067 .000Benefits to thecustomers andgovernmentApproach for thewholesalers andretailersTax revenue to thegovernmentincreased rapidlyEconomicsituations.409 3.3765 1.21673 .06016 6.258 .000409 3.5452 1.29423 .06400 8.520 .000409 3.4621 1.25212 .06191 7.464 .000409 3.3790 1.11612 .05519 6.867 .000From the above table it is found that checking the tax evasion andtransparency possess the mean values of 3.71 and 3.58 respectively. Withsignificant t-values of 14.082 and 12.997. Therefore it is concluded that theimplementation of VAT is useful checking for the tax evasion and transparency isabundantly found in the implementation VAT system.VAT improved exports and It increases government profits possess the meanvalues of 3.95 and 3.78 respectively. With significant t-values of 24.425 and 15.358.Therefore it is concluded that the implementation of VAT is useful is improved for theexports and increases government profits found in the implementation VAT system.It reduces the material cost and Comparing VAT system with erstwhile sales taxgives more favorable response towards VAT possess the mean values of 4.0416and 4.0342 respectively. With significant t-values of 23.627 and 24.830. There fore itis concluded that the implementation of VAT is reduces material cost and comparingwith the sales tax is abundantly found in the implementation VAT system.12

NMeanStd.DeviationStd. ErrorMeanT (lower)Sig. (2-ailed) lowerMore difficulties are found in the instruction of VAT system than sales tax andInflation increases due to VAT implementation programmes possess the meanvalues of 3.9584 and 3.8411 respectively. With significant t-values of 26.379 and16.518. Therefore it is concluded that the implementation of VAT is more difficultiesare found in the instruction of VAT system and increases inflation is abundantlyfound in the implementation VAT system. VAT implementation improves the revenuegrowth and VAT implementation increases the confidence of the customers on theirtax aspects possess the mean values of 3.1345 and 3.3447 respectively. Withsignificant t-values of 2.270 and 6.126. therefore it is concluded that theimplementation of VAT improves the revenue growth and increases the confidenceof the consumers on their tax aspects. It curtails sales tax at different stages and Itgives mutual benefits to the customers and government possess the mean values of3.5012 and 3.3765 respectively. With significant t-values of 8.067 and 6.258.Therefore it is concluded that the implementation of VAT is curtails sales tax atdifferent stages and mutual benefits to the consumers and government.It sets smooth approach for the wholesalers and retailers possess the meanvalue 3.5452. With significant t-value of 8.520. Therefore it is concluded that theimplementation of VAT smooth approach for the wholesalers and retailers. The totalcollection of tax revenue to the government increased rapidly and It is more suitablefor the Globalised Economic Situations possess the mean values of 3.4621 and3.3790. With significant t-values of 7.464 and 6.867. Therefore it is concluded thatthe implementation of VAT is increases total collection of tax revenue and moresuitable for the globalised economic situations.VAT14. Opinion on Suggestions for Effective Implementation ofVAT implementation is an indispensable phenomenon to give mutual benefitto the Consumers, Retailers, Wholesalers, Chartered accountant and Taxofficals. The application of t-test exactly ascertain the opinion of suggestions foreffective implementation of VAT on Consumers, Retailers Wholesalers, Charteredaccountant and Tax officals. The following are the results of the t-test.Table NO.5One-Sample Statistics for Effective Implementation of VATUniform productclassification409 3.3374 .89036 .04403 7.664 .000Input tax credit 409 2.6308 1.46298 .07234 -5.104 .000practical approachto VAT409 2.6308 1.36953 .06772 -5.452 .000Single Windowassessment409 3.5183 1.03861 .05136 10.093 .000Complete abolitionof CST409 3.6259 .94683 .04682 13.369 .00013

From the above table it is found that Introduction of uniform productclassification across the country possess the mean value 3.3374. with significant t-value 7.664. therefore it is concluded that the implementation of VAT is uniformproduct across the country. Extension of input tax credit to central sales taxes alsopossess the mean value2.6308. with significant t-value -5.104. therefore it isconcluded that the implementation of VAT is extends of input tax credit tocentral sales taxes. Adoption of a practical approach to VAT audits for assessmentpossess the mean value 2.6308. with significant t-value -5.452. Therefore it isconcluded that the implementation of VAT practical approach to VAT audits forassessment. Introduction of single window assessment process for all taxespossess the mean value 3.5183. With significant t-value 10.093. Therefore isconcluded that the implementation of VAT is single assessment process for alltaxes.15. FACTOR ANALYSISFactor analysis by principle component method is used to reduce thevariables into pre-dominant factors.15.1 FACTORS OF VAT IMPLEMENTATIONThe VAT implementation comprises 15 variables pertaining to characteristicsof VAT and its implementation consequences in the research the VATimplementation opinion is ascertained through 15 variables as stated the t-test. It is require to downsize these 15 variables into predominant factors. At thisjuncture factor analysis the principle component method is applied and the followingresults of ascertained.14

Total% ofVarianceCumulative %Total% ofVarianceCumulative %stages range is .872. This implies the variance range is 87.2%. It gives mutualbenefits to the customers and government variance range is .910. This implies thevariance range is 91.0%. It sets smooth approach for the wholesalers and retailersvariance range is.915. This implies the variance range is 91.5%. The total collectionof tax revenue to the government increased rapidly variance range is .778. Thisimplies the variance range is 77.8%. It is more suitable for the globalised economicsituations variance range is .817. This implies the variance range is 81.7%.Table No.7Total Variance Explained for VAT ImplementaionComponentInitialEigenvaluesRotation Sums ofSquared LoadingsTax Evasion 5.597 37.315 37.315 4.249 28.325 28.325Transparency 2.362 15.744 53.059 2.818 18.790 47.115Improved Exports 2.120 14.133 67.192 2.584 17.230 64.345Government Profits 1.583 10.554 77.746 2.010 13.401 77.746Material Cost .826 5.506 83.252Response towardsVAT.707 4.714 87.966Difficulties are foundin the instruction ofVAT system thansales tax.506 3.374 91.340Inflation .420 2.797 94.137Revenue Growth .342 2.278 96.415Tax aspects .177 1.183 97.598Sales tax .132 .880 98.478Benefits to thecustomers andgovernmentApproach for thewholesalers andretailersTax revenue to thegovernmentincreased rapidly.113 .753 99.231.077 .515 99.745.026 .171 99.916Economic situations. .013 .084 100.000Extraction Method: Principal Component Analysis.From the above table it is found that 15 variables are convenient to four majorfactor with individual eigen values 4.249, 2.818, 2.584 and 2.010 and individualvariance 28.325, 18.790, 17.230 and 13.401. The 15 variables explained 77.746%variance which is significant to segregate factors. The variable loadings on therepresented in the following Rotated Compounded Matrix.16

TABLE No.8ROTATED COMPONENT MATRIX (A) for VAT implementaionComponent1 2 3 4Approach for the wholesalers andretailers.939Revenue to the government .817Globalised economic situations. .808Sales tax .769Benefits to the customers and.762governmentRevenue growth .588Inflation .548Tax aspects .783Sales tax at .753Response towards VAT .697Difficulties are found in the instruction.587of VAT system than sales taxTax evasion .864Transparency .843Improved Exports .890Government Profits .881Material CostExtraction Method: Principal Component Analysis.Rotation Method: Varimax with Kaiser Normalization.a Rotation converged in 9 iterations.From the above table the first factor consists of 7 variable with variableloadings It sets smooth approach for the wholesalers and Retailers (.939) The totalcollection of tax revenue to the government increased rapidly (.817) It is moresuitable for the globalised economic situations (.808). It curtails sales tax at differentstages (.769). It gives mutual benefits to the customers and government (.762).Inflation increases due to VAT implementation programmes (.588) and more difficultiesare found in the instruction of VAT system than sales tax (.548). Therefore thisfactor is known as “VAT OUTCOMES”. VAT implementation improves the revenuegrowth (.783) VAT implementation increases the confidence of the customers ontheir tax aspects (.753 ) It reduces the material cost (.697) Comparing VAT system witherstwhile sales tax gives more favorable response towards VAT (.587). Therefore thisfactor is known as “VAT BENEFITS“. VAT implementation checks the tax evasionperiodically (.864) Transparency is prevailing in the VAT implementation process (.843).Therefore this factor is known as “VAT REAL PROCESS”. VAT improved exports(.890) It increases government profits (.881). Therefore this factor is known as “VATFEATURES”.17

16. CONCLUSIONVAT out comes and VAT benefits are analogs to each other. The VAT realprocess and its implementation are able to ascertained the exact VAT feature. TheVAT implementation gives the maximum benefits to the customers and its featuresare tending towards benefits for the sellers and customers.17. CLUSTER ANALYSISThere exist 3 clusters in the sample unit the first cluster as strong perceptionsabout VAT and its implication, so this cluster is called “Dynamic Cluster”. The thirdcluster moderately ascertained the implementation of VAT its consequences in themarket. So there are called “Mediculous Cluster”. The third group of cluster isvery week in the notaions regarding VAT. So this is known as “UnambitiousCluster”.Classification of respondents based on perceptions of VAT and opinion onImplementation of VATThe Research obtain 409 respondents from Tamil Nadu and Karnataka therespondents clearly expressed the opinion on VAT in likert‟s 5 point scale. Thereperceptional differences are identified through k-means cluster analysis. It identifiesheterogeneity of respondent based on the scores of likert‟s 5 point scale. Thefollowing table presents the opinion of respondents based on the factors.1. VAT Outcomes2. VAT Benefits3. VAT Real Process4. VAT Features.18

TABLE No.9Final Cluster Centers for VAT implementationCluster1 2 3Tax Evasion 4.21 2.31 3.47Transparency 3.38 1.97 3.01Improved Exports 3.71 3.34 2.94Government Profits 4.19 3.27 3.64Material Cost 4.26 3.47 3.41Response towards VAT 3.52 2.92 2.39Difficulties are found in theinstruction of VAT systemthan sales tax3.47 3.39 2.29Inflation 4.01 4.34 3.36Revenue Growth 3.93 3.32 3.69Tax aspects 3.94 3.68 2.75Sales tax 3.70 3.92 2.89Benefits to the customersand governmentApproach for thewholesalers and retailersTax revenue to thegovernment increasedrapidly2.38 2.20 2.014.68 4.59 4.524.50 4.31 4.29Economic situations. 3.37 2.95 2.85TABLE :10Number of Cases in each ClusterCluster 1 234.000 57.21%2 59.000 14.42%3 116.000 28.36%Valid 409.000The above table it is found that the sample unit is classified into 3heterogeneous groups with frequency among the three groups the First group Strongin VAT OUTCOMES and VAT BENEFITS. Therefore this cluster is known as“Unambiguous Cluster” (57.21%). Whereas the Second Cluster is Weak in VATOUTCOMES. So the Cluster is known as “Mediculous Cluster” (14.42%). But theThird Cluster is Strong in VAT FEATURES. Therefore this group is known as“Dynamic Cluster” (28.36%). On the whole it is concluded that around 50% ofrespondents are able to realize the implementation of VAT on there businessestablishment. It is also identified that the remaining 50% are not fully aware of VATand its Implementation. They are unaware of VAT effectiveness, unenthusiastic anddo not have clarity over VAT procedure.19

18. Classification of Respondents based on Perceptions of VATandSuggestions to Increase the Effectiveness Implementationof VATThe Research obtain 409 respondents from Tamil Nadu and Karnataka therespondents clearly expressed the opinion on VAT in likert‟s 5 point scale. Thereperceptional differences are identified through k-means cluster analysis. It identifiesheterogeneity of respondent based on the scores of likert‟s 5 point scale. Thefollowing table presents the opinion of respondents based on the factors.1. Product Classification2. Tax Credit3. Practical Approach4. Single Window AssessmentThere exist 3 clusters in the sample unit the first cluster as strong perceptionsabout VAT and its implication, so this cluster is called “Uniformity Cluster”. Thesecond cluster moderately ascertained the implementation of VAT its consequencesin the market. So there are called “Need to be Improved”. The third group of clusteris very week in the notaions regarding VAT. So this is known as “Adoptable Cluster”TABLE :11Final Cluster Centers for Suggestions for Effective Implemetaion ofVATCluster1 2 3Introduction of uniformproduct classificationacross the countryExtension of input taxcredit to central salestaxes alsoAdoption of a practicalapproach to VAT auditsfor assessmentIntroduction of singlewindow assessmentprocess for all taxes.3.91 3.07 2.394.21 2.73 4.274.14 3.35 3.533.89 3.23 3.03TABLE :12Number of Cases in each ClusterCluster 1 243.000 59.41%2 102.000 24.93%3 64.000 15.64%Valid 409.000The above table it is found that the sample unit is classified into 3heterogeneous groups with frequency among the three groups the First group Strong20

Sum ofSquaresdfMeanSquareFSig.in Tax Credit and Practical Approach But moderate in Product Classification andSingle Window Assessment. Therefore this cluster is known as “UniformityCluster”(59.41%). Whereas the Second Cluster is Weak in Tax Credit.Moderate in product classification, practical approach and single windowassessment. So the Cluster is known as “Need to be Improved”(24.93%). But theThird Cluster is Strong in tax credit of VAT. But weak in Product Classification.Therefore this group is known as “Adoptable Cluster”(15.64%). On the whole it isconcluded that around 59% of respondents are very much effective implementationof VAT and its total output remaining 25% are not need to be improved as well asadoptable cluster 15.64% to possess the awareness of VAT.19. ANOVAThe six areas of improvement of taxes are Rate of tax, Classification ofindustrial inputs, Compliance Procedure, Refund Registration, Registration processand Maintaining and improving Accounting procedures are considered asindependent variable and VAT implementation and suggestion as dependentvariables.20. Relationship between areas of Improvement and VATImplementation and SuggestionsThe six areas of improvement are Rate of tax, Classification of IndustrialInputs, Compliance Procedure, Refund Procedures, Registration Procedure andMaintaining and Improving Accounting Procedures are considered as Independentvariables and opinion of VAT implementation and Suggestions for effectiveimplementation of VAT as dependent variables.TABLE: 13ANOVA table for opinion of VAT Implementation, Areas of Improvement andSuggestions for Effective Implementation of VATTax Evasion BetweenGroups7.720 4 1.930 1.885 .112Within Groups 413.610 404 1.024Total 421.330 408Transparency BetweenGroups4.138 4 1.034 1.137 .339Within Groups 367.662 404 .910Total 371.800 408Improved Exports BetweenGroups22.553 4 5.638 6.087 .000Within Groups 374.229 404 .926Total 396.782 408Government profits BetweenGroups4.498 4 1.125 1.240 .29321

Sum ofSquaresdfMeanSquareFSig.Material costResponse towardsVATDifficulties are foundin the instruction ofVAT system thansales taxInflationRevenue growthTax aspectsSales taxBenefits to thecustomers andgovernmentApproach for thewholesalers andretailersTax revenue to thegovernmentincreased rapidlyWithin Groups 366.391 404 .907Total 370.890 408BetweenGroups2.070 4 .518 .668 .615Within Groups 313.211 404 .775Total 315.281 408BetweenGroups6.375 4 1.594 1.652 .160Within Groups 389.674 404 .965Total 396.049 408BetweenGroups224.233 4 1.058 1.032 .391Within Groups 414.408 404 1.026Total 418.641 408BetweenGroups1.547 4 .387 .501 .735Within Groups 311.841 404 .772Total 313.389 408BetweenGroups3.852 4 .963 1.120 .347Within Groups 347.454 404 .860Total 351.306 408BetweenGroups1.636 4 .409 .430 .787Within Groups 384.765 404 .952Total 386.401 408BetweenGroups3.140 4 .785 .823 .511Within Groups 385.109 404 .953Total 388.249 408BetweenGroups7.209 4 1.802 1.940 .103Within Groups 375.353 404 .929Total 382.562 408BetweenGroups .614 4 .154 .609 .656Within Groups 101.884 404 .252Total 102.499 408BetweenGroups 1.483 4 .371 .988 .414

Sum ofSquaresdfMeanSquareFSig.EconomicsituationsUniform productclassificationInput tax creditpractical approachto VATSingle windowassessmentprocess for alltaxesWithin Groups 151.686 404 .375Total 153.169 408BetweenGroups1.110 4 .278 .346 .847Within Groups 324.239 404 .803Total 325.350 408BetweenGroups3.258 4 .814 1.034 .390Within Groups 318.326 404 .788Total 321.584 408BetweenGroups.493 4 .123 .161 .958Within Groups 308.109 404 .763Total 308.601 408BetweenGroups.980 4 .245 .339 .852Within Groups 292.315 404 .724Total 293.296 408BetweenGroups.605 4 .151 .215 .930Within Groups 284.207 404 .703Total 284.812 408From the above table it is found that the respondents differ in opinion aboutVAT Improved Exports (F=6.087) (p=.000) differ significantly at 5% level. Thisimplies the respondents are not of the opinion that VAT implementation as incidentalimpact over exports. In other opinion the respondents do not differ in the notions ofVAT Implementation.23

Type of CustomerStateLocationStatus of businessAge of theBusinessEducationalQualficiationIndustryExperience in thefieldAwarnessKnow about VATAnnual TurnoverVAT ImplementationPublicityTAX RatesImplicationsVAT RatesFilling monthlyReturnE-fillingRelaxation /consessionComputer & InternetConnectionF=2.46F=2.267F=2.609F=2.430F=1.744F=1.205F=1.027F=0.733F= 7.821F= 0.822F= 1.234F= 1.942F= 0.751F= 1.308F= 2.385F= 1.356F= 0.859F= 1.157F= 2.810F= 1.938VATIMPLEMENTATION1. VAT OUTCOMES2. VAT BENEFITS3. VAT REAL PROCESS4. VAT FEATURESSUGGESTIONS FOREFFECTIVEIMPLEMENTATION OF VAT1. PRODUCTCLASSIFICATION2. TAX CREDIT3. PRACTICAL APPROACH4. SINGLE WINDOWASSESSMENT24

21. Number of AssessesTamil Nadu Value Added Tax Act 2006 has not defined the word assessee,but it can be defined as any person by whom tax or any other sum of money ispayable under this Act.TABLE No.10NUMBER OF ASSESSEESYEARS VARIABLES PERCENTAGE2007 – 2008 179714 40%2008 - 2009 205319 41%SUM 385033AVERAGE 192516.5STD DEV 18105.47SUM 9.4046TREND 179714GROWTH 179714SOURCE : Commercial Tax DepartmentThe Number of Assesses in the year 2007-2008 and 2008-2009 revealed thatthe average is 192516.5 lakhs. The Trend and Growth is showed constant in theyear of 2007-2008 and 2008-2009. Standard Deviation emphasized its consistencyin the constant increase of number of assesses.22. Number of Non-assessesNon –Assessees are not liable to pay tax under the Act but they areregistered dealers under the Tamil Nadu Value Added Tax Act 2006.Dealers means any person who carries on business of buying, selling,supplying or distributing goods, directly or otherwise, whether for cash or for deferredpayment, or for commission, remuneration or other valuable consideration.A Registered Dealer is one who registered as dealer under Tamil Nadu ValueAdded Tax Act 2006.TABLE No.12NUMBER OF NON-ASSESSEESYEARS VARIABLES PERCENTAGE2007 – 2008 266537 60%2008 - 2009 291396 59%SUM 557933AVERAGE 278966.5STD DEV 17577.97SUM 6.30110TREND 266537GROWTH 266537SOURCE : Commercial Tax DepartmentThe Number of Non- Assesses in the year 2007-2008 and 2008-2009revealed that the average is 278966.5 lakhs. The Trend and Growth is showed25

Constant in the year of 2007-2008 and 2008-2009. Standard Deviation emphasizedits consistency in the constant increase of number of Non-Assesses.Sales tax under TNGSTArticle 243 of the Indian constitution authorize the legislatures of the states tomake laws applicable within their Jurisdiction in respect of matters in List II of theseventh schedule of the constitution. Sale and purchase transactions originating andending within the territorial limits of any state have been considered to be a statesubject. The state government have been given powers to impose taxes on suchtransactions.Under Tamil Nadu general sales tax act 1959, Tamil Nadu governmentimpose single point tax on sale or purchase of goods, within the state. A single pointtax is levied either at the first stage or at the final stage. In other words single pointtaxation means imposition of tax at only one point between production and the saleof goods.Generally state legislature enact taxing laws to meet their financial needs.Tamil Nadu government also enacted laws were enacted under the following heads1. General Sales Tax Act2. Surcharge Act3. Resale Tax Act4. Additional Tax ActAfter introduction of Value added tax act, the above tax laws were abolished.TABLE : 13SALES TAX UNDER TNGSTYEARS VARIABLES PERCENTAGE2007 – 2008 301 Nil2008 - 2009 259 -13.953SUM 560AVERAGE 280STD DEV 29.69848SUM 10.60357TREND 301GROWTH 301SOURCE : Commercial Tax DepartmentThe Sales tax under TNGST in the year 2007-2008 and 2008-2009 revealedthat the average is 280 hundreds. The Trend and Growth is showed Constant in theyear of 2007-2008 and 2008-2009. Standard Deviation emphasized its consistencyin the constant increase of Sales ta x under TNGST23. Central Sales TaxThe division of powers between parliament and the state legislatures tolegislate laws is defined by article 245 of the Indian constitution.The CST act provides for levy on inter-state sales. However, the concept thatrevenue form sales tax should be collected by states has been retained. Though it iscalled central sales tax act, the tax collected under the act in each state is kept by26

that state only tax on inter- state sale is levied by union government. While tax onintra-state sale is levied by the state government of the state in which saletakesplace. It is provided under in our constitution that tax on inter state sale willonly by law of parliament.TABLE :14CENTRAL SALES TAXYEARS VARIABLES PERCENTAGE2007 – 2008 1744 Nil2008 - 2009 1653 -5.217SUM 3397AVERAGE 2264.667STD DEV 64.346SUM 2.8413TREND 1744GROWTH 1744SOURCE : Commercial Tax DepartmentThe Central Sales Tax in the year 2007-2008 and 2008-2009 revealed thatthe average is 2264.667 thousands. The Trend and Growth is showed Constant inthe year of 2007-2008 and 2008-2009. Standard Deviation emphasized itsconsistency in the constant increase of Central Sales Tax.FINDINGS Type of customer of the sample unit comprises 54% of Chartered accountant arehigh. State of the sample unit comprises 71.4% of Tamil Nadu. Business of the sample unit comprises 45.7% of Semi-Urban. 66.8% of therespondents belong to company. 46% of the respondents unit comprises 41 – 50 years are high. 54.5% of theRespondents are Post-Graduates. 50.1% of the respondents having are Cement Industry. 54.8% of the respondentshaving the Experience 16-20 years are high. 62.6% of the respondents opined Awareness about VAT system. 62.3% of theRespondents opined Knowledge about VAT. 36.7% of the Respodents Annual Turnover is 15,00,001-20,00,000. 57.5% of theRespondents seen the Government / Empowered Committee‟s PublicityCampaign. Relationship between areas of Improvement and VAT Implementation andsuggestions Respondents are not opinion that VAT Implementation as incidentalimpact over Exports. In other opinion the respondents do not differ in the notionsof VAT Implementation. The type of Customer, State, Location, Status of the business, Age of business,Educational qualification, Industry, Experience in the field, Awareness, Knowabout VAT, Annual turnover, Publicity, Implications of VAT Introduction, VATImplementation system, Tax Rates, VAT Rates, Filling Monthly Return, E-filling,Relaxation/concessions, Computer and Internet Connectivity are essential tounderstand to implement of VAT system and suggestions for effectiveImplementation of VAT27

Number of Assesses for Tamil Nadu Trend and Growth is showed constant in theyear of 2007-2008 and 2008-2009. Number of Non-Assesses for Tamil Nadustandard deviation emphasized its consistency in the constant increase in theyear of 2007-2008 and 2008-2009. The Sales Tax under TNGST in the year 2007-2008 and 2008-2009 revealed thatthe average is 280 Crores for Tamil Nadu. Central Sales Tax for Tamil Nadu theTrend and Growth is showed Constant in the year of 2007-2008 and 2008-2009. The VAT Revenue in the year 2007-2008 and 2008-2009 revealed that theaverage is 278966.5 Crores. In the year 2007-2008 the Tax Slab Wise Assessesrevealed that -12.827% is decreased in the particular range from Rs.5,000-10,000 it is also found that a conspicuous increase is noticed in the year 2007-2008 in the Slab Rs.50 crs and above is 271.428%. In the year 2008-2009 distribution of assesses by turnover and tax slab (Rs.100-200 crores) is 200% which is decreased in the particular range from Rs.1-5 lakhsit is also found that a conspicuous increase is noticed in the year 2008-2009 inthe slab Rs.10-50 lakhs and above is 666.666% on the Average in the year2008-2009 is 15.636 crores have been obtained as VAT. It is also found amoderate variation is found in the slab Rs.10000-50000 is 300%. A moderatevariation is found in the slab Rs.1-10 Crores is 350% for Distribution of assessesby turnover and tax slabs in 2008-2009 (Rs.200- 300 crores). In the year 2007-2008 distribution of tax revenue by turnover and tax slab(Rs.300-400 crores) is 222.846% which is decreased in the particular range fromRs.50-100 lakhs it is also found that a conspicuous increase is noticed in the year2007-2008 in the slab Rs.1-10 crores is 4989.508%. It is also found a moderatevariation is found in the slab Rs.20-30 crores is 178.598% (Rs.400-500 crores). On the Average in the year 2007-2008 is 203036.833 crores have been obtainedas VAT (Rs. 500 and above). The CT Revenue and Net State Domestic Product (NSDP) in the year 2007-2008and 2008-2009 revealed that the average is 21261.5 thousands. The own tax revenue of Tamil Nadu in the year 2007-2008 and 2008-2009revealed that the average is 33826.5 thousands. NSDP at current prices of Tamil Nadu in the year 2007 -2008 and 2008-2009revealed that the average is 271230.5 lakhs. Statewise sales tax and state‟s own tax revenue of Tamil Nadu in the year 2007–2008 and 2008-2009 revealed that the average is 17991 thousands. Central sales tax of Tamil Nadu in the year 2007 -2008 and 2008-2009 revealedthat the average is 1698.5 thousands. For Karnataka Standard Deviation emphasized its consistency in the constantincrease of number of assesses. The Number of non-Assesses in the year of Karnataka is from 2006-2007 to2008-2009 revealed that the average is 297135.3 lakhs. Sales tax in the year of Karnataka is from 2006-2007 to 2008-2009 revealed thatthe average is 335.333 Crores. The Central Sales tax of Karnataka is from 2006-2007 to 2008-2009 revealedthat the average is 1573 thousand. The revenue of Karnataka in the year from 2006-2007 to 2008-2009 revealed thatthe average is 16416 thousand.28

SUGGSETIONS1. Since the Consumers and Retailers are Unaware of certain Implementationprocess of Value added tax. It is suggested the government should comewith transparent norms to enlighten the retailers and consumers.2. The <strong>study</strong> ascertained maximum benefit to the government through ValueAdded Tax system. So it is strongly recommended to have innovative slabsystem suitable for Wholesalers, Retailers and Consumers.3. Factor Analysis revealed the Implementation of Value Added Tax ispredominant among the Retailers as well as Consumers. A separate systemmust be transisly implemented for the mutual benefit of purchasers andsellers.4. VAT features are highly competent to allot benefit to the government. So thechannel of distribution and flow of VAT must be reformed.5. A transparent approach Rate of Tax, Refund Procedure, Maintaining andimproving accounting procedure are the immediate need for an hour.6. It is strongly recommended that the tax consultant and the government shouldperiodically to monitor the procedure.CONCLUSIONThe Value Added Tax makes an evasive attempt on Implementation level aswell as execution level. The <strong>study</strong> revealed the requirement of transparency in VATin all the states of India. It is found that equal channel of distribution of VAT is foundamong Wholesalers, Retailers and Consumers. The tax applicability and e-filingplays a vital role in the VAT system. It gives mutual benefits to the Consumers andGovernment. Service tax, sales tax and other taxes can be easily vivid due to itsImplementation process. But the transparency is required at all the level in order toobtain effective functioning in the VAT system in all the states of India. Theintroduction of Uniform Product Classification across the country is required toexhibit the Implementation process with effective return. The adoption benefits ofpurchasers and sellers equally. The single window system and Abolition of CST areindispensable to obtain the cent percent success of VAT.29

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JOURNALS Agarwal N.P and Sonia Agarwal (March.2003), “Fundamental Aspects andScope of Value Added Tax in India”, The Management Accountant, Vol.38, No.3 Agrawal.B.N and Abin Sarkar (November.2006),“Value Added Tax”, TheManagement Accountant, Vol. 41, No.11 Ajitava Raychaudhuri, Udip kumar Sinha and Poulomi Roy (May 2007), “Is thevalue added tax reform in India poverty – improving? An analysis of data fromtwo major states”, ajitav_rc@rediffmail.com Akash S.B. and A.S. Shiralashett (April.1 & 15, 2005), “Value Added Tax : ASwot Analysis”, Southern Economist, Vol.43, No.23&24 Akash. Dr.S.B and Dr.K.Harishkumar (March.2006), “Value Added Tax : A Birds-Eye-View, Kisan World, Vol. 33, No. 03 Arindam Das – Gupta (September.3, 2005), “Will State VAT Deliver”, Economicand Political Weekly, Vol.XL, No.36 Chanchawat.K.L (December.2004), “Value Added Tax – Some Key Aspects”,The Chartered Accountant, Vol.53, No.6 Dilip Kumar Mukherjee (April.2003), “Introducing Value Added Tax (VAT) inIndia”, Dilip Kumar Mukherjee, The Management Accountant, Vol.38, No.4 Ganapathi Dr.R.and S.Sannasi (March.2008), “VAT Effect : Taxation Made LessTaxing”, Business and Economic Facts for You, Vol.28, No.06 Gurumurthi.S (1999), “Fiscal Federalism Towards an Appropriate VAT Systemfor a Federal Economy”, Economic and Political Weekly”, Vol.XXXIV, No.40,Ocober.2,1999 James Hines, Jr., Michigan (November 17, 2005), “Value Added taxes andinternational Trades : The Evidence”, Business School, law.umich.edu,Thursday, Kamashetty Dr.S.B, “Value Added Tax (VAT) Need to Strenghthen the Teeth”,The Economic Challenger, No.8, Issue 30, January-March 2006 Kamashetty S.B (February.15, 2005), “ Value Added Tax : Need to Move onRight Path”, Southern Economist, Vol.43, No.20 Kavita Rao (June.26, 2004), R, “Impact of VAT on Central and State Finances”,Economic and Political Weekly, Vol.XXIX, No.26 Krishna Kumar Verma (November.1, 2005), “VAT in Tax Reforms: Problems andProspects”, Southern Economist, Vol.44, No.13 Kulbhushan Chandel Dr.S.S.Narta and Sudhanshusood (April. 2006), “AnIntegrated Approach to Value Added Tax in the Emerging Economic Scenario”,Indian Journal of Marketing, Vol.XXXVI, No.4 Narayana.K (july.15,2005), “Implications of VAT and its application in India,vol.44, no.16 National Institute of Public Finance and Policy July, 2002), “HarmonizingTaxation of Inter-State Trade under a Sub-National VAT Lessons fromInternational Experience Discussion Paper No.8. Noronha Dr.M.R (January – March 2006), “VAT- A Instrument to Liberalize theEconomy Further”, The Economic Challenger, No.8, Issue 3031

Prof.Sunil Gupta and Dr.Kulbhushan (December. 2003), “VAT and Unfair TradePractices–An Evaluation, Indian Journal of Marketing, Vol.XXX111, No.12 Ramesh Kumar D.R. (Jan.15, 2006), “VAT Scenario in India : An analysis”,Southern Economist, Vol.44, No.18 Ramesh Kumar D.R.(Jan.15, 2006), “VAT Scenario in India : An analysis”,Southern Economist, Vol.44, No.18 Satheeskumar.L and Dr.V.Selvaraj (January-march 2009), “Implications of VAT”,the economic challenger, NO.11, Issue.42 Sathish Kumar.A (Aug.1.2004), “Value Added Tax Enigma”, Southern Economist,Vol.43, No.7 SelvaKumar Dr.M. and C.Thina (October 2008), “VAT : Some Practical Issues", ,The Management Accountant, Vol. 43, No.10 Selvakumar Dr.M.and P.G.Kathiravan (April 2009), “VAT: some practical issues”,business and economic facts for you, vol.29, No.7 Shuangllin LIN(June 2008), “China‟s value- added tax reform, capitlaccumulation, and welfare implications”, china economic review, volume 19,issue 2, , pages 197-214, www.science direct.com,. Sitaram Agarwal (May.2005), “Value Added Taxation in India”, The ManagementAccountant, Vol.40, No.5 Sivamurgun.C and Dr.V.Anbumani (January – March 2007) “Value Added Tax :Experiences in India”, The Economic Challenger, No.9, Issue. 34, January –March 2007, P.No. 57 to 63. Somanth mukherjee (June.2005), “VAT audit”, the management accountant,Vol.40, No.6 Sukumar Mukhopadhyay (February.17, 2001),“VAT : A Closer Look”, SukumarMukhopadhyay, Economic and Political Weekly, Vol.XXXVI,No.7 Sukumar Mukhopadhyay (May.10,2003), “VAT in an Impasse”, Economic andPolitical Weekly, Vol.XXXVIII, No.19 Sukumar Mukhopadhyay (September.7, 2002), “Value Added Tax HowImplementation Is Going Wrong”, Economic and Political Weekly, Vol.XXXVII,No.3632

WEBSITES Finance.indiamart.com/taxation/valule-added-tax.html www.rediff.com/money/2003/apr/12 vat.htm www.dateyvs.com/salestax.vat.htm Rediff.com/money/2004/jul/12 guest.htm mpra.ub.uni-muenchen.de/206/1/MPRA- paper-206.pdf en.wikipedia.org/wiki/talk : value – added – tax www.law.umich.edu/center sand programs/olin/workshops.htm www.worldjute.com/wj-vat .htm Ramesh Chandra (Member Secretary- Empowered Committee of State FinanceMinisters). www.rediff.com/money/2003/apr/12vat.htm www.solarnaigator.net/ venture-capital/VAT.htm. www.worldjute.com allindiantaxes.com/vat-karnataka.php www.knowledgebible.com/forum/showthre www.houseofaccountants.com Business.gov.in/taxation/vat.php www.tnvat.gov.in/English/downform.htm “Evaluation of Value Added Tax in India”, Dr.S.K.Khatik, ejournalmdr.com “CETMA meet to <strong>study</strong> VAT implications” , Richa Mishra NEW DELHI, Jan. 22. “A Value-Added Tax (VAT) in Thailand: who wins and who loses?, Shantayanandevarajan, Somchai jitsuchon and Chalongphob sussangkarn, www.tdri.or.th “Value Added taxes and international Trades : The Evidence”, James Hines, Jr., Michigan Business School, law.umich.edu, Thursday, November 17, 2005 “Value Added Tax (VAT)”, 2008 (India), www.worldjute.com “VAT - Boon or Bane?” “Impact of VAT in Central and State Finances an Assessment, Kavita Rao. “Beware the value added tax”, Daniel J. Mitchell, Ph.D, www.heritage.org “Is the value added tax reform in India poverty – improving? An analysis of datafrom two major states”, Ajitava Raychaudhuri, Udip kumar Sinha and Poulomiroy, May 2007, ajitav_rc@rediffmail.com “VAT Survey 2006”, www.pwc.com “China‟s value- added tax reform, capitl accumulation, and welfare implications”,china economic review, volume 19, issue 2, June 2008, pages 197-214,www.science direct.com, shuangllin LIN.33