This study aims to understand the impact of value added tax (VAT) in India at the state level in 2005. The introduction of VAT by 21 Indian states is an important challenge for business enterprises, as it would lead to reallocation of resources and changes in business processes and performance. To achieve this, five sub objectives have been set forth: critical analysis of the existing system of sales tax, study the implementation of VAT in India, analyze the impact of VAT on the business processes, impact of change in the processes on the performance of business enterprises upon introduction of VAT and analyze the attitude of business enterprises towards VAT as an input in their business decisions. A consistent research design has been adopted to determine the difference between the enterprises from VAT and non-VAT states on the basis of their profile