VAT is aeons better than the old system of sales tax. VAT has in itself an inbuilt system of monitoring that taxes are paid on time and minimizes the load on the regulatory authority to ensure compliance. VAT or Value added tax means that every member in the value chain will pay tax to the government for the value that is added by him in manufacturing that product. Now this means that the next person in the value chain will be able to reduce his tax liability by reducing the amount of tax already paid by the preceeding member in the value chain. This will make him take his supplies from a vendor who pays his tax so that he can claim input tax credit. The 30 states and Union territories that have adopted VAT in India have shown a 26.6% increase in revenues in the first quarter of 2006-07. Hip hip hurray!
How does the consumer benefit from all these? More taxes leads to more revenue for government, more infrastructure- better roads, transportation facilities, lower costs, lower prices. wow!
But it makes me cringe when i see people paving the way for unscruplous traders to evade tax. Take the example of a fuel station. Its swanky to just go stop your car beside the filling station, open the fuel tank using the remote release, give some money to the guy who obediently waits by your door, fill your tank and drive away. The very honest petrol pump dealer will later fill in bills for all these people who have filled fuel, be a honest citizen and pay tax on every drop of fuel dispenses. Balls!!! He is gonna evade as much as he can, and you think he is being nice to you by having a guy wait on you to collect cash from you while you fill up!