Brief History of VAT : Value Added Tax (VAT) India
Brief History of VAT : Value Added Tax (VAT) India
VAT has its origin in European Countries (EC). It was pioneered in France, which introduced a value added type of consumption tax on goods in 1954 that was levied at the production stage. The tax was merged with the existing tax on services and local tax on retail sales into a single comprehensive levy, which extended through the retail stage in 1968. This was then adopted by other member states of EC. Adoption of VAT was made a condition for membership of EC, thereby, it was adopted by other new entrants to EC. Due to this, Europe could create a single market by abolishing fiscal frontiers in 1993.
In the world, more than 160 countries have successfully implemented VAT system of taxation. Out of 24 member countries of Organization for Economic Cooperation and Development (OECD), 21 countries have accepted VAT as their main consumption tax.
Thus, VAT as it exists today was unknown about 25 years back. Its widespread in the last 25 years is one of the most significant event in the evolution of tax structure.