There are two effects of VAT :

On the goods market

On the labour market

In the good market with lower tax, disposable income will increase that will shift the IS curve rightwards leading and as result leading to Aggregate demand curve rightwards.

In the labour market with decrease in tax the labour demand will increase and as a result Aggregate supply curve will shift right.

Hence both the price and employment will rise.

I wonder how I will draw it in a diagram