A Critical Study of the Evolution and Impact of Value Added Tax in Indias Indirect Tax System

Dr. Rohitashwa Kumar

Value Added Tax, indirect taxation, MODVAT, CENVAT, tax reform, cascading effect, revenue impact, state VAT, India, fiscal policy.

The introduction of Value Added Tax marked a critical turning point in the evolution of India’s indirect tax system. This paper critically examines the historical progression, implementation strategies, and multifaceted impacts of VAT between 1986 and 2010. It explores how VAT transformed traditional sales tax regimes, addressed key issues of cascading and transparency, altered government revenues, and influenced compliance and industry efficiency. Special attention is given to the interplay between central and state fiscal policies, the phased rollout of VAT across Indian states, and the challenges encountered during adoption. The study employs historical data, policy analysis, and comparative findings to evaluate the broader economic and administrative consequences of VAT.