Penalty and other measures
The penalties prescribed in the VAT Act are different in for different Offences and it still differs from state to State.
Where any amount is refundable to a dealer after having duly verified the fact of deposit of such amount, the assessing authority shall in the prescribed manner refund to such dealer the amount to be refunded either by cash payment or by adjustment against the tax or other sum due in respect of any other period. Such refundable amount shall carry interest at the rate as may be notified by the State Government from time to time, with effect from the date of its deposit.
Where an amount or tax is collected at any check-post from any person who is not registered under the Act and such amount or tax is not found payable by him, or where an amount in lieu of tax for any work is deducted in any manner by an awarder from any bill of payment to a contractor, who is not liable to get registration under the Act, the amount so collected or deducted shall be refunded in the prescribed manner by the Assistant Commissioner or the Commercial Taxes Officer, as the case may be, in whose territorial jurisdiction such person or contractor ordinarily resides.
Any tax levied and collected under this Act, in respect of the sale or purchase inside the State of any declared goods which are subsequently sold in the course of inter-State trade or commerce and on which tax has been paid under the Central Sales Tax Act, 1956 (Central Act 74 of 1956), shall be refunded to the person making such sale or purchase in the course of inter-State trade or commerce.
A refund can be claimed only by the dealer or the person, who has actually suffered the incidence of tax; and the burden of proving the incidence of tax so suffered shall be on the dealer or the person claiming the refund.
Advantages of VAT
Removes the cascading of taxes due to its inherent features of offering set-off of taxes paid already.
Encourages widening of tax base and reduction in rates of tax.
A properly designed system of VAT does not distort trade and production methods i.e. it does not induce shifting of production bases, vertical integration or disintegration, or changes in constitution of the entity.
Encourage better compliance due to the availability of set off of taxes paid, and thereby less evasion.
Improves economic efficiency with its neutrality with respect to forms of organizations, production facilities and location.
Particularly improves export competitiveness of local industries due to 'zero rating' of exports.
It creates an audit trail due to its inherent nature where the purchase invoice forms the basis for obtaining credit of tax. It also has a "self-policing effect" since it requires proper maintenance of purchase and sale documents to avail the credit.
The VAT has a self-enforcing effect in that buyers demand invoices from suppliers which would otherwise not be sought by most buyers.
VAT is usually accompanied by a lesser number of rates which makes administration much easier and record keeping less tedious for traders.