Multi-stage tax system

A multi-stage tax system is an indirect taxation structure where a tax is levied on a product at multiple points in its production and distribution chain, from raw materials to the final sale to consumers. Each stage adds value, and the tax is generally applied on the value added at that stage.

Key Features: Charged at multiple stages: Tax is applied during production, wholesale, and retail. Indirect in nature: The tax is ultimately borne by the end consumer, though collected at each stage by businesses. Value-added approach: Modern implementations (like GST) often use a credit mechanism to avoid double taxation. Helps governments generate revenue at each stage of the supply chain.

Example: Manufacturer buys raw materials for ₹100 and produces goods worth ₹200. Tax at 10% → ₹20. Wholesaler buys for ₹200, sells at ₹300. Tax at 10% → ₹30. Retailer sells to consumer at ₹400. Tax at 10% → ₹40. Total tax is collected at multiple stages, ultimately borne by the consume