What is VAT? What are advantages and disadvantages of VAT in India?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 preetham asked over 3 years ago

What is VAT? What are advantages and disadvantages of VAT in India?

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Nanda Kumar K N answered almost 2 years ago

Value-Added Tax (VAT) is a tax on consumer spending. It is collected by VAT-registered traders on their supplies of goods and services effected within the State, for consideration, to their customers. Generally, each such trader in the chain of supply from manufacturer through to retailer charges VAT on his or her sales and is entitled to deduct from this amount the VAT paid on his or her purchases. Advantages of VAT: 1. As compared to other taxes, there is a less chance of tax evasion. VAT minimizes tax evasion due to its catch-up effect. 2. VAT is simple to administer as compared to other indirect tax. 3. VAT is transparent and has minimum burden to consumers as it is collected in small fragments at various stages of production and distribution. 4. VAT is based on value added not on total price. So, price does not increases as a result of VAT. 5. There is mass participation of taxpayers. Disadvantages of VAT: 1. VAT is costly to implement as it is based on full billing system. 2. VAT is relatively complex tounderstand. The calculation of value added in every stage is not an easy task. 3. To implement the VAT successfully, customers, need to be conscious, otherwise tax evasion will be widespread.

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