The product for which the sales tax is to be levied depends heavily in Tamil Nadu to determine the exact amount of tax in this part of India. Sales tax has been in use since many years in Tamil Nadu but with the introduction of VAT since January 1, 2007 many conditions have changed. It was in
annual budget meeting of July, 2006 when this change was introduced. It also includes various other changes in the sales tax regulations of Tamil Nadu. Some of these changes are as follows:
1) Sales tax was reduced from 4% to 1% on tea.
2) Pulses and oil are exempted from sales tax
3) Tea auction centers of Coonoor and Coimbatore have been gifted with,reduction in central sales tax to 2% from 4% and general sales tax is also reduced to 4% from 8 %. For all sales from these auction centers any surcharge or additional tax is also exempted.
4) Central sales tax on tea in the auction centres of Tamil Nadu is reduced from 2% to 1%.
5) Fly ash is also exempted from sales tax if it is purchased by a brick manufacturer.
6) In Tamil Nadu sales tax is exempted on Hank Yarn
7) Sales tax is exempted on Gum Benzoin
8) Sales tax is also exempted on the licensed Tamil software
Although it seems as if the provisions are provided by lowering sales tax in Tamil Nadu to reduce the price of goods but it is not true as it is joining other countries by adding an extra tax known as Value Added Tax or VAT. The information available on the subject does not explain the role of VAT and sales tax, whether it replaces or is an addition to sales tax.
If VAT is introduced to replace sales tax then it would be beneficial only if final price of the product is reduced but that also depends upon the amount of the product. It may not be good for customers, as in many cases VAT is higher than the normal sales tax thus increasing the price of the product.