1. ROLE OF VAT IN CURRENT ECONOMIES CA. RAJENDRA KUMAR P Contact No: +91 9382303403 / 9444017087 Email Id: rk@ssaca.in

2. ROLE OF VAT IN CURRENT ECONOMIES  Given the option, none of us would like to pay taxes  But two things are always certain – Taxes and Death  Taxes are of various kinds - principally two i.e., Taxes on Income and Taxes on Consumption

3. ROLE OF VAT IN CURRENT ECONOMIES  Consumption taxes are the most ancient. Their presence can be found in Chanakya’s Arthasashtra – 300 B.C.  Taxes have inspired revolts. Ex: The Boston Tea Party, The Whisky Tax and in India – The Salt Satyagraha  Consumption taxes have also influenced political changes  Consumption tax, VAT, GST all are one and the same

4. ROLE OF VAT IN CURRENT ECONOMIES  Generally,  VAT is neutral - It does distinguish between the rich and the poor  VAT does not tax the savings  No distortion of spending habits  Welfare States now rely more on VAT

5. ROLE OF VAT IN CURRENT ECONOMIES  Economists and Tax Experts favour consumption taxes for economic growth  The modern form of VAT was introduced in France [European Union] in 1954  In 1995, the VAT receipts of EU was around 10% and it rose to around 31% by 2012  Ageing societies like Japan look towards VAT as potential revenue generation

6. ROLE OF VAT IN CURRENT ECONOMIES  The cost of collection of VAT has always been a challenge  VAT is a tax on consumption and not business.  Hence, compliance cost is a major administrative burden  Attractive VAT rates promote attractive investments

7. ROLE OF VAT IN CURRENT ECONOMIES  Exemptions are contrary to VAT principles  VAT aims at neutrality  Reverse Charge  20% of the world’s tax revenue is now raised through VAT  Implementing pure VAT in Federal economies like Brazil, India and Canada

8. ROLE OF VAT IN CURRENT ECONOMIES Rs.1,37,355 Crores Non Tax Revenue 16% 84% Rs.741877 Crores Tax Revenue

9. ROLE OF VAT IN CURRENT ECONOMIES  This chart shows that the share of Indirect Taxes towards the total tax revenue earned by the government is around 64% Other Rs.2,67,395

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