FIRST POINT AND MULTI-POINT SYSTEM OF TAXATION

Most states today have a First Point system of taxation, (together with additional levies to garner more revenues) under which the commodities are subject to tax at the first sale taking place within the State. The same commodity is not taxed as it moves down the distribution chain, unless it is further processed/manufactured and becomes a different product.

The Multi-point system taxes commodities at every stage of production/distribution, though the rate of taxation is lower than in the case of the First Point tax system. Kerala, Karnataka, and Tamilnadu have a multi-point tax system for selected commodities, where there is a resale tax of 1% to 1.5% on every subsequent sale.

Delhi and Punjab generally levy tax on the last sale (or purchase) by the registered dealer. In Punjab, 81 commodities are taxable at first-point (yielding almost 60% of the revenue) and are granted a set off from their tax liability when bought by registered manufacturers on sale of their finished goods.