Value Added Tax

Advantages of VAT

Since ages always a reform is made for the benefit in the process of development. It was Chanakya who first wrote that a government should tax its people like a shepherd shears his flock or a bee gets nectar from a flower. But apparently that fiscal wisdom died with him. Let us not experience the same with VAT in India. It has a baggage full of benefits. Few advantages of VAT in India are mentioned below.

It will be a virtual crime not to look to the other side of the coin of the Indian VAT system. Disadvantages will always give birth to amendments to the existing policy so that traders can ride jerk free on it adding value to the existing Indian taxation system. We have also discussed upon the friction of VAT below.

In the advantages part we will first look after the broad coverage of VAT in the Indian market. Then we will consider the level of security the Indian VAT is having on our revenues. Obviously the selection of items to be covered by VAT in India will be given a bullet to think upon and at last we will check out the co-ordination VAT in India will be having with our existing direct tax system.

1) Coverage

If the tax is carried through the retail level, it offers all the economic advantages of a tax that includes the entire retail price within its scope, at the same time the direct payment of the tax is spread out and over a large number of firms instead of being concentrated on particular groups, such as wholesalers or retailers.

If retailers do evade, tax will be lost only on their margins because customers that are registered firms gain nothing if their suppliers fail to collect tax, except delay in payment; they will pay more to the government themselves. Under other forms of sales tax, both seller and customer gain by evading tax. One particular advantage is that of the widening of the tax base by bringing all transactions into the tax net. Specifically, VAT gives the new government the opportunity to bring back into...