Echoes of the Fiat Case in State Vat: Selling Below Purchase Price Drains Input Tax Credit

Abstract

When VAT is levied at every conceivable stage in the trade chain, tax cascading will push up prices beyond common endurance if no input tax credit were provided. The alternative is to levy old-style sales taxes and restrict the stages at which such taxes can be collected. The present condition of Indirect taxes- whether it is the age-old central excise and customs duties or the centrifugal service tax or the recent miscellany of state value-added taxes - does not cause any optimism.