Merits and demerits of vat

Answer 1

Merits:

1. No Tax Evasion

2. Ensured Neutrality

3. Transaction based System(i.e., it is applicable to all Sales.. that is the simple equation is follows Net VAT payable = Vat on Sales - Vat on Purchases)

4. Transparency

5. Multi-point Taxation

6. Eliminates Cascading Effect

7. Self policing System.

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Demerits:

1. Varying VAT Rates

2. No Credit against other Taxes

3. Increase in tax administration cost

4. No Discrimination between Rich and Poor.