VAT Tax - Theory of Levying - Essay ExampleThe main advantage of VAT is the cascading type tax (CTT); the biggest limitation from a CTT to a VAT is the ability of an increase in inflation. A book, The Modern VAT was published in 2001 by the International Monetary Fund and it defines VAT as "A broad-based tax levied on commodity sales up to and including, at least, the manufacturing stage, with systematic offsetting of tax charged on commodities purchased as inputs -- except perhaps on capital goods -- against that due on outputs."India and the US, two of the worlds democracies, don't have VAT system because the idea behind the VAT is system is a tax to end all taxes, but other countries that have VAT don't levy entry or luxury duty. If the prices of stock transfer goods increase then the impact of the VAT system would be, the "Denial of tax credit in respect of inter-state stock transfers will prejudice investment in less developed states or states with relatively small 'internal' markets.
