Tax Cascading

 

Tax Cascading

Tax cascading occurs under the center as well as the state taxes. The most significant contributing factor to tax cascading is the partial coverage by central and state taxes, Mining, agriculture, wholesale and retail trade, and range of the center. The exempt sectors are not allowed to claim any credit for the Cen vat, or the service tax paid on their inputs.

Similarly, under the State VAT, on credits are allowed for the input to the exempted sectors, which include the entire service sector and sale of exempted goods. Another major contributing factor to tax cascading is the central sales is allowed by any state government.