Nature of VAT

 Country Examples

 Disadvantages

Independent VATs at Centre and States

Brazil, Russia, Argentina

Differences in base and rates weaken administration and compliance. Inter-state transactions difficult to manage.

VAT levied and administered at Centre

Australia, Germany, Austria, Switzerland, etc.

State government relieved of responsibility of raising taxes which also takes away fiscal discretion of States

Dual VAT

Canada and India today

A combination of the above two and hence limits both their disadvantages

“Clean” dual VAT

India’s GST

Common base and common or similar rates facilitate administration and compliance, including for inter-state transactions, while continuing to provide some fiscal autonomy to States