Nature of Vat/GST :
International VAT/GST guidelines issued by OECD (Organisation for Economic Cooperation and Development) state as follows [quoted with approval in Coca Cola India v. CCE (2009) 22 STT 130 (Bom HC DB) and ABB Ltd. v. CCE (2009) 21 STT 77 = 15 STR 23 (CESTAT 3 member bench)]
‘Value added tax systems are designed to tax final consumption and as such, in most cases, it is only consumers who should actually bear the tax burden. Indeed, the tax is levied, ultimately, on consumption and not on intermediate transactions between firms, as tax charged on these purchases is, in principle, fully deductible. This feature gives the tax its main characteristic of neutrality in the value chain and towards international chain. – – Value added taxes are taxes on consumption, paid, ultimately by final consumers- – In principle, business should not bear the burden of tax since there are mechanisms in place that allow for a refund of the tax levied on intermediate transactions between firms’.