Like Excise is levied on manufacture of goods and Service Tax is levied on provision of services, similarly VAT is levied on sale of goods.

It is a form of indirect tax and is in nature of multipoint sales tax that needs to be paid to state in form of VAT. It is levied under Central and State VAT legislation and depends on movement of goods in pursuance of sale transaction. If transactions involve movement of goods from one state to another, this tax is levied under Central Sales Tax Act (CST), 1956.