Advantages of VAT/GST :
It can be seen that all earlier disadvantages have gone in Vat system. Advantages of VAT are as follows :
(a) End use based exemptions or concessions can be given as tax as shown in invoice is the total tax borne by that commodity. Concessions can be given to goods used by poor people. Government has flexibility in applying varying tax rates to different commodities.
(b) Exports can be freed from domestic taxes, which is permissible under WTO.
(c) Vat provides an instrument of taxing consumption of goods and services.
(d) Interference in market forces is minimum.
(e) Aids tax enforcement by providing audit trail through different stages of production and trade.
(f) Vat acts as a self-policing mechanism. For example, B will get credit only if A issues invoice showing tax. Hence, B insists on tax invoice from A. Thus, B acts as police for A, C acts as police for B and so on. This increases tax compliance. It also indirectly increases income tax revenue.
(g) Tax evasion is reduced. Even if tax is evaded at one stage, the transaction gets caught in next stage of production or distribution and then Government gets its revenue.
(h) Simplicity with minimum distortion in tax structure – as there are few variations in tax rates and exemptions from taxation are very few.
(i) Transparent – The invoice shows total tax borne by that commodity. There are no hidden taxes.
(j) Certainty in taxation due to simple tax structure and minimum variations.