|Value added tax (VAT), also known as goods and services tax (GST), is a tax paid on exchanges. It is different from sales tax as sales tax is levied on the total value of the exchange. A value added tax is an indirect tax. This tax is collected from someone who does not bear the entire cost of the tax.
In most of the states in India, sales tax has been replaced with the new value added tax. This kind of tax is imposed on only goods and not on services and has replaced sales tax. VAT is implemented at the State level by State Governments. VAT is applied on each stage of sale with a mechanism of credit for the input Value added tax paid.