Introduction
MODVAT (Modified Value Added Tax) is a tax system that was introduced in India in the Union Budget of 1986-87. It was introduced to reduce the burden of taxes on manufacturing industries and to make them more competitive in the global market.

Definition
MODVAT is a tax system that allows manufacturers to claim credit for the taxes paid on inputs used in the production process. This means that manufacturers can reduce their tax liability by claiming credit for the taxes paid on raw materials, components, and other inputs.

Objective
The objective of MODVAT is to reduce the cascading effect of taxes on the manufacturing sector. Under the previous tax system, taxes were levied on the value of the product at every stage of production, leading to a higher tax burden for manufacturers. MODVAT eliminated this cascading effect by allowing manufacturers to claim credit for the taxes paid on inputs.

Impact
MODVAT had a significant impact on the manufacturing sector in India. It reduced the tax burden on manufacturers, making them more competitive in the global market. It also led to a reduction in the prices of manufactured goods, benefiting consumers.

Conclusion
In conclusion, MODVAT was introduced in India in the Union Budget of 1986-87. It was aimed at reducing the burden of taxes on the manufacturing sector and making it more competitive in the global market. MODVAT allowed manufacturers to claim credit for the taxes paid on inputs and led to a reduction in the prices of manufactured goods.