Economic development has been one of the most popular slogans in almost all the developing countries all over the world. Similarly, achievement of high rate of economic growth rate, reduction of income disparities and poverty, and improvement of living standard of people are some development strategies towards which most of the government efforts have been directed in developing countries. Value Added Tax (VAT) as the term suggests, is a tax on the value added to the commodity at each stage in the production and distribution chain. The study is focused on impact of value added among the wholesalers and retailers, in the context of Coimbatore, a district in south India which is the Manchester of South India. India. The objectives are to study the attitude of the respondents towards VAT, to examine the merits and demerits of VAT System and to contribute suggestions for policy implications. The study aims at understanding the opinion of the tax payees on the problems associated with the payment of tax. Primary data was collected from 300 VAT-paying units each located in the urban areas of Coimbatore. The identified sample dealers and the businessmen approached and the data pertaining to the amount of VAT paid, membership, and the problems. There is a need to create awareness among the customers that demanding no bill for the items purchased by them not only puts the government in loss but it also deprives them of all their rights like warranty/ guarantee against the items purchased. It is observed by the VAT officials that the rate of dealers’ compliance with the VAT system is moderate. It is suggested that the government should design a suitable tax structure compatible with voluntary tax compliance and a simple tax collection and verification mechanism as a means of promoting voluntary compliance. The multiplicity of tax rates and slabs in VAT by commodities results in confusion in calculating the exact Tax amount to be paid. These, in turn has resulted in the dissatisfaction among the traders and businessmen. The opinion of the tax payer in the time delay in getting the refund of the excess amount paid also resulted in dissatisfaction.