Value Added Tax made in first opening in France in 1954. At that time it was not a full VAT system, since it was restricted to manufacturers and whole-sellers. The retailers and agriculturist were kept beyond its purview.

In the past three decades this new system was introduced world-wide including India in about 130 countries. 

VAT IN INDIA 

Neither rain no hail could stop the Government from introducing VAT w.e.f 1^st day of April, 2005 in almost entire country.

In the present form, VAT is a transition from the present sales tax systems to a full VAT and then onto a Goods and Services Tax (GST). The transition phase will continue till CST is phased out. In the long-run , once the Goods and Services Act comes into force, India would become one market and there would not be any difference in procuring goods or services within the State or from outside the State. 

FIVE YEAR OF VAT  

No doubt that our tax collections have risen between 20% to 30% since the introduction of VAT. But the main question that arises is whether we have achieved the set-out objectives during these initial three years. In the midst of political interferences, & in spite of it teething problems while replacing such old established sales tax system, reducing cascading effect,  reducing large number of tax laws and large number of tax exemptions, in spite of lack of professionalism and poor expertise of the State administrations have evolved as a solid measure for making the way for the much awaited tax implementation of GST .

The consumer at large has been benefited by the introduction of VAT. The dealers have also been benefited with introduction. 

GLOBAL DEMAND OF A TAX SYSTEM 

Only honest tax payers payees regular taxes whereas the offenders are still walk escort free. The idea to bring GST is to make a chain which is difficult to break and base of tax collections may widen, so that at lower rates better revenue may be garnered.

When an MNC wants to do business in India it finds new laws in each State. Not only that but they find so many laws applicable on them that find it impossible to work with such a country like India and they reroute to some other neighboring country like China. Therefore, it is almost imperative now to enter in the era of GST.  

DOUBLE TAXATION 

1.  The GST will make no differentiation between Good and Services as the GST is levied at each stage in the supply chain. The problem of double taxation was addressed by the Supreme Court of India in the landmark decision of BSNL Vs UOI (2006 (3) SCC-1). The Supreme Court had held that the same activity cannot be regarded as both goods and services and hence both service tax and VST should not be applicable on the same set of transaction. However, inspite of the ruling in the BSNL case, there has been a lot of confusion whether to treat specified activities as goods or services . Implementation of GST will resolve the dilemma of a large number of assessees  

JUSTIFICATION IN IMPLEMENTATION OF GST  

Inspite of the success of VAT at large there are still some shortcomings both in the Central and State level. In the existing State-level VAT Structure there are also certain shortcomings . There are, for instance, even now several taxes which are in the nature of indirect tax on goods and services, such as Entry Tax , luxury tax, entertainment tax etc., are yet not subsumed in the VAT scheme . At present the Central Government is charging Central Excise Duty at the point of removable of goods from the place of manufacture. The Central Excise Duty is to be deposited irrespective of payment against goods removed from the place of manufacture. Service tax is charged on the date of rendition of services or the date of receipt of payment whichever is earlier. The State VAT if chargeable at the time of sale of goods irrespective of receipt of payment against such sale. The introduction of GST will be a solution to it. GST would be chargeable on each transaction like sale of goods, incorporation of goods in a individual contract,  hiring equipment, lease paid , consultation fee paid ,rendition of any service or may be a transfer of immovable property etc.

The introduction of unified GST would bring VAT in its true sense. Presently the VAT system, basically can be called un-integrated GST, in the sense that at present goods and services are taxed separately .

The taxable event under GST system will be the “supply of goods” and the “supply of services”. The current taxable event such as “manufacture”, “sale of goods” “render of services” will not be relevant under GST system.

The prices of commodities are expected to come down in the long run as dealers pass on the benefits of reduced tax incidence to consumers by slashing the prices of goods. Being a consumption based tax, dual GST will result in better revenue collection for states with higher consumption of goods and services. This is been explained with an example . ( assuming CSGT at 12% and SGST at 8%) 

It is evident from the above example that due to multiplicity of taxes and due to non-availability of input tax credit across the board the final price to the consumer is much higher not only due to tax component but due to cascading affect also.