Explanation:

VAT is an indirect tax levied at different stages of trade by the government. The primary purpose of VAT is to ensure that there is no duplication or repetition of tax, thereby ensuring that no single entity is overburdened by it. VAT is typically collected by the state government in which the final transaction takes place, putting the onus on respective state commercial tax departments to ensure that it is collected. CENVAT is an adaptation of VAT, which came into force in the country in 1986 in the form of MODVAT (Modified Value Added Tax). This MODVAT was converted into CENVAT in the early 2000’s with no major changes in its implementation or execution. Today, MODVAT isn’t used as a term and CENVAT is the tax charged by the Central government on products or services at different levels of manufacture.