Difference Between VAT and Sales Tax
Lets clear out battle between VAT vs sales tax. Sale tax is levied on the sale and purchase of commodity in India. Sale tax is basically a percentage of taxable sales price. Its scope comes under the central government. Like, VAT, it is also falls under the category of indirect taxes. Where the VAT is State Act law, it is a Central Act Law. Its scope is wide as compared to VAT. Sales tax is restricted to the goods and commodities while VAT includes service part also as Labor charges also. VAT is levied at every point on producer and consumer both, while Sales tax is levied on final consumer only. This is one point of difference between VAT and sales tax.
Sales tax and VAT difference also states that Sale tax is very clear and the consumer is well versed with the part of tax he is going to pay on the particular commodity. Sales tax is somewhat complex as compared to VAT. The major advantage of VAT is it makes the transaction very clear and the possibility of tax fudging is reduced to the minimum possible level, on the other hand the scope of sales tax doesn’t cover this. VAT is a multi tax point whose credit is available by the one who has paid the same, in this way the producer or retailer keep beyond the burden of payment of their VAT liability.
However, under sale tax, tax is charged on the final value of commodity and the consumer knows how much he has to pay and therefore, it is a single point taxation. Under VAT, the price of the commodity is less as it is equally charged on producer and consumer as it is imposed since the time of production whereas in sale tax the price is more as the consumer exclusively bear the burden of tax.
In the developing countries like India, nuisance of VAT is difficult, however, it is becoming much popular and the government is earning huge revenue from this tax. Indirect taxes provide a huge contribution to government kitty.