Why was VAT introduced?<\/h3>\n\n\n\n
Mainly VAT was introduced to eliminate the double tax as well as the cascading effect of the existing sales tax structure. <\/p>\n\n\n\n
A cascading effect is when a tax is levied at every stage of the sale. The tax so paid is also on the tax paid by the previous buyer, hence the consumer pays tax on already paid tax.<\/p>\n\n\n\n
Need A Legal Advice<\/strong><\/h3>\n\n\n\nThe internet is not a lawyer and neither are you. Talk to a real lawyer about your legal issue<\/p>\n\n\n\n
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<\/a><\/figure><\/div>\n\n\n\n<\/div>\n\n\n\nAdvantages of VAT<\/h3>\n\n\n\n
Adjustment on purchased goods- <\/strong>As per the present system, the tax paid on manufactured goods <\/a>has to be adjusted against the tax payable on the manufactured goods.<\/p>\n\n\n\nAdjustment of the purchased goods to depend on the amount of tax payable-<\/strong> there are no provisions over the refund or any carry over upon such goods, except in the case of export goods or goods manufactured out of the country or sale to a registered dealer. Similarly, on the sale of interstate tax-paid goods, no refund shall be provided.<\/p>\n\n\n\nTransparency- <\/strong>previously, the tax paid in the previous stages on the goods or the sale or purchase was not transparent, as the amount of tax which was applied over the goods was not known at the subsequent stage. However, in the VAT system the amount of tax levied at every stage of the sale or purchase of goods would be known.<\/p>\n\n\n\nFair- <\/strong>VAT introduces uniform tax rates across the state, hence unfair advantages could not be taken while the tax is levied.<\/p>\n\n\n\nSimplified procedure-<\/strong> procedures related to the filing of returns, payments of taxes, furnishing declaration<\/a> and assessment have been simplified under the VAT system.<\/p>\n\n\n\nMinimize the discretion- <\/strong>VAT aims to provide minimum discretion, with the assessing officer so that every person is treated in a similar manner. There would be no discretion in the imposition of penalty, late filing of returns, non filing of returns, or tax evasion. Such a system would be free of harassment. <\/p>\n\n\n\nComputerisation- <\/strong>the digitalisation of the taxation system would result in the focus on the tax evaders. In a large number of cases, no processing or scrutiny of returns would be required as it would free the tax complaint dealers from all the harassment which is part of the assessment. <\/p>\n\n\n\nDisadvantages of VAT-<\/h3>\n\n\n\n
Discourage spending-<\/strong> critics point out that taxing income sometimes has the perverse effect of dissuading people from earning it. If the country started to tax spending it would result in spending less and saving more, as saving would be tax free. It would impact the economy negatively.<\/p>\n\n\n\nRepressiveness-<\/strong> in a progressive tax system, the more you earn, the more you spend, however, this would be opposed in the case of VAT as it is inherently regressive. Generally the poorer a person is, the more likely he is to spend, rather than saving his money. Which means a large proportion of the population, i.e. a low earning individual\u2019s income shall be subjected to VAT rather than that of a higher earner\u2019s income. <\/p>\n\n\n\n
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<\/a><\/figure><\/div>\n\n\n\nAdvantages of VAT<\/h3>\n\n\n\n
Adjustment on purchased goods- <\/strong>As per the present system, the tax paid on manufactured goods <\/a>has to be adjusted against the tax payable on the manufactured goods.<\/p>\n\n\n\n Adjustment of the purchased goods to depend on the amount of tax payable-<\/strong> there are no provisions over the refund or any carry over upon such goods, except in the case of export goods or goods manufactured out of the country or sale to a registered dealer. Similarly, on the sale of interstate tax-paid goods, no refund shall be provided.<\/p>\n\n\n\n Transparency- <\/strong>previously, the tax paid in the previous stages on the goods or the sale or purchase was not transparent, as the amount of tax which was applied over the goods was not known at the subsequent stage. However, in the VAT system the amount of tax levied at every stage of the sale or purchase of goods would be known.<\/p>\n\n\n\n Fair- <\/strong>VAT introduces uniform tax rates across the state, hence unfair advantages could not be taken while the tax is levied.<\/p>\n\n\n\n Simplified procedure-<\/strong> procedures related to the filing of returns, payments of taxes, furnishing declaration<\/a> and assessment have been simplified under the VAT system.<\/p>\n\n\n\n Minimize the discretion- <\/strong>VAT aims to provide minimum discretion, with the assessing officer so that every person is treated in a similar manner. There would be no discretion in the imposition of penalty, late filing of returns, non filing of returns, or tax evasion. Such a system would be free of harassment. <\/p>\n\n\n\n Computerisation- <\/strong>the digitalisation of the taxation system would result in the focus on the tax evaders. In a large number of cases, no processing or scrutiny of returns would be required as it would free the tax complaint dealers from all the harassment which is part of the assessment. <\/p>\n\n\n\n Discourage spending-<\/strong> critics point out that taxing income sometimes has the perverse effect of dissuading people from earning it. If the country started to tax spending it would result in spending less and saving more, as saving would be tax free. It would impact the economy negatively.<\/p>\n\n\n\n Repressiveness-<\/strong> in a progressive tax system, the more you earn, the more you spend, however, this would be opposed in the case of VAT as it is inherently regressive. Generally the poorer a person is, the more likely he is to spend, rather than saving his money. Which means a large proportion of the population, i.e. a low earning individual\u2019s income shall be subjected to VAT rather than that of a higher earner\u2019s income. <\/p>\n\n\n\nDisadvantages of VAT-<\/h3>\n\n\n\n