In general, which is better for the taxpayer, VAT or GST ?

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  • 1 decade ago
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    Tough question...VAT is tax applied at each stage of the production process where a GST is applied to the end product or service.

    When you say taxpayer, it is important to realize WHO that terms applies to.

    In a VAT approach, the taxpayer is the next consumer in line. For example, coal is sold to a power company - then the power company is the taxpayer. The power company in turn sells electricity to a company that makes cars...then the car company is the taxpayer.

    With GST, the general public is typically the taxpayer, although businesses also buy the end product from other businesses.

    In either system, the consumer is usually absorbing the tax - whether the collective tax of a VAT or the end tax of a GST.

    They are so similar that the only measurable difference to the final consumer is the rate of tax. In that case a GST is preferred since it can be half the rate of a VAT.

  • 1 decade ago

    VAT is Value added tax which works on the concept of paying taxes on the value addition part only, ie if a person buys an item for 100 Rs and pays tax of 10 Rs on it and sells it for 120 Rs and collects Rs 12 as tax on it from the buyer, the amount of tax that he will pay to the Government will be the difference between the tax collected from the buyer ie 12 Rs and the tax paid when the item was bought ie 10 Rs which in this case shall be Rs 2. This incidentally is the 10% tax on the value addition of 20 Rs.

    In the case of GST this principle does not work and tax is payable at every stage on the full value, VAT is therefore a better option.

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