An Alternative Models for the Accumulation of VAT Refund

Accumulation of the VAT refund is the major flaw in the VAT system which certainly pushes the future of industry into the dark and also unnecessarily harasses the industrial units because lots of funds are blocked in the form of refund with the government which otherwise could be invested in the business. The manufacturer needs to pay Input VAT when the raw materials are bought and it is realized till the goods are disposed-of. Under the preview of the VAT system, the dealers either setoff the Input VAT against the Output VAT or lodge a claim with the government for the excess Input VAT. The present research work tries to explore and confirm the factors responsible for the delayed VAT refund. Five factors are extracted which are accountable for the Accumulation of the VAT refund. Conceptual Factors found to be the main factor responsible for the delayed VAT refund. The refund mechanism under the VAT regime is not very effective not only in our country but also in the neighboring countries from where the system has been adopted. The second and third major factor responsible for the delayed VAT refund are 'Fraud and Tax Evasion' and 'Interstate VAT Divergence' respectively. However the foremost objective of the VAT implementation by almost all countries in the world is to cope up with the unwanted leakage of taxes in the form of fraud and tax evasion. VAT is used as a tool to bring the harmony in the countries but however it could not bring uniformity in India rather it causes divergence in the volume of the VAT refund in the states.