CENVAT (Central Value Added Tax)

CENVAT (Central Value Added Tax) is a tax levied by the Indian central government on manufacturers for producing goods and providing certain services. It is designed to reduce the cascading effect of multiple taxes by allowing businesses to claim credits for the taxes paid on raw materials and input materials used in production. Essentially, businesses pay tax on their output after deducting the tax already paid on their inputs, ensuring that only the value added at each stage is taxed. This system promotes manufacturing, reduces tax burden, and encourages compliance within the formal economy.