MODVAT – Modified Value Added Tax
Modified Value Added Tax is abbreviated as MODVAT. It is a unique system which is under Central Excise Rules that permits the manufacturers or makers of excisable goods or products to avail the credit of duty paid on the notified inputs received and it is utilized in or in relation to a fabricate of conclusive items and to use such credit towards the liability of duty on removal of final goods. The purpose and reason behind the MODVAT scheme are to abstain from falling impact of taxes which is double taxation on inputs along with the final products.
The Central government reported the MODVAT scheme and it is modified Value Added Tax in the month of March in 1986. With impact from first of the month, March in 1994 and this scheme has been extended to goods which is related to petroleum except for SBP or Hexane or HSD or MS and which are utilized as an input in the manufacturing of other excisable goods.