One of the most important principles of VAT is neutrality, which means that VAT should apply uniformly across goods and services. This is ensured through the standard VAT regime coupled with the right of deduction on intermediate consumption. An exemption regime, such as that applied to financial and insurance services, goes against VAT neutrality because it restricts the right of deduction for non-taxed activities. This results in cost, impact on business structures, competitive disadvantage, etc.
Source Deepak Agarwal
