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Indirect Taxation

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Marudhachalamurthi asked about 3 years ago

Difference between VAT & GST?

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12 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Pankaj answered almost 3 years ago

The Difference Between GST and VAT Although explanations of the difference between the two taxes are plentiful on the Internet, most government ministries treat them as one tax with two names. In a 2006 position paper, "International VAT/GST Guidelines," the International Organisation for Economic Cooperation and Development begins by noting that the VAT is "also called the Goods and Services tax." Other countries' finance ministries, such as Malaysia's and Botswana's, make similar assertions. No country has both a VAT and GST. Nevertheless, pursuing the difference or its lack may be a linguistic dead end. Since the implementations of this tax, whatever it is called, vary so significantly from one country to another, it is relatively easy to discuss the difference between one country's VAT and another country's GST. But it is equally easy to discuss the differences in the taxes of two countries, both of which call their tax a VAT, or between the taxes in two other countries, both of which call their tax a GST. There is, however, a difference between the GST/VAT and a sales tax. Sales taxes are not necessarily imposed at every stage of the supply chain and may be imposed only on the consumer. Many countries have both a comprehensive GST/VAT and a sales tax. In Canada, for example, some provinces have what the Canada Revenue Agency calls a "harmonized GST and HST," the latter being a provincial sales tax that is harmonized with the country's federal GST. In provinces that have not elected to combine the two, there are two separate taxes -- the federal GST and a provincial sales tax.

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Open uri20170510 32134 1c996lj?1494421732 Anil answered almost 3 years ago

--One difference which is worth noticing is the reduced cost which a trader would incur under the GST **regime as compared to what would be his outflow until the GST is implemented.Under the **VAT system of claiming tax credit,a trader is not allowed to deduct the amount of service tax paid by him on the input services --VAT is levied on goods whereas GST on both goods & services as it is evident from the name. -- VAT laws are different from state to state GST is made to remove the state differences in the Taxation.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 jitendra etikala answered almost 3 years ago

1. VAT is levied on goods whereas GST on both goods & services as it is evident from the name. Edit:However, in Europe VAT is levied on both goods & services as pointed out by Richard Russell 2. GST would have a uniform rate in all the states which VAT lacks as each state levies it rate of duty for each goods. 3. Input credit can be set-off only against the goods sold within the state whereas incase of GST not only you can set-off input credit against goods sold within the country but also against the services. The introduction of GST is to overcome the short-comings of VAT with these 3 issues mentioned above tops the list. Other than that, the paperwork will be reduced and more clarity on indirect taxes by introduction of GST.

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Open uri20170510 32134 1c996lj?1494421732 Anil answered almost 3 years ago

One difference which is worth noticing is the reduced cost which a trader would incur under the GST regime as compared to what would be his outflow until the GST is implemented.Under the VAT system of claiming tax credit,a trader is not allowed to deduct the amount of service tax paid by him on the input services The United States does not have either a goods and services tax or a value added tax, but most countries do. Although most sources maintain that GST and VAT are simply two different names for the same tax, some do not. Reach, an international company that specializes in GST tax software, for example, distinguishes between them. **The Ideas Behind the GST** Countries that have gone to a GST generally do so as a means of consolidating various taxes into a single tax on all goods and services. The GST often replaces some combination of excise taxes, duties and taxes on behavior, which include taxes on betting, luxury goods, entertainment and entry into the country. GST is imposed at every stage of the supply chain. A 6 percent tax, for example, may be imposed on the suppliers of raw materials, again upon the manufacturer who uses those materials and then successively on the distributor, retailer and consumer. While this appears at first to be a burdensome accumulation of taxes, because each payer of the GST is also tax-credited for that payment, the actual burden is significantly lower. **The fundamental ideas underlying the GST are**: • **Equity**: Everyone pays. Countries, such as Spain and Greece, that have attempted to impose many different kinds of taxes often end up with many wealthy tax cheats and many tax-burdened urban poor. • **Efficiency**: It replaces the time-consuming and manpower-intensive imposition of several different taxes with a single tax, thus lowering overhead expenses for government, producers and consumers. • **Accountability**: Many countries have many relatively high taxes -- for example on ownership of real estate or even specific entities such as swimming pools -- but in the confusion of many different taxes and avenues of collection, these taxes are often uncollected. Because a record of payment must be made at every transaction in the sequence from origin to consumer, the GST is relatively easy to police and therefore to collect. **The Difference Between GST and VAT** Although explanations of the difference between the two taxes are plentiful on the Internet, most government ministries treat them as one tax with two names. In a 2006 position paper, "International VAT/GST Guidelines," the International Organisation for Economic Cooperation and Development begins by noting that the VAT is "also called the Goods and Services tax." Other countries' finance ministries, such as Malaysia's and Botswana's, make similar assertions. No country has both a VAT and GST. Nevertheless, pursuing the difference or its lack may be a linguistic dead end. Since the implementations of this tax, whatever it is called, vary so significantly from one country to another, it is relatively easy to discuss the difference between one country's VAT and another country's GST. But it is equally easy to discuss the differences in the taxes of two countries, both of which call their tax a VAT, or between the taxes in two other countries, both of which call their tax a GST. There is, however, a difference between the GST/VAT and a sales tax. Sales taxes are not necessarily imposed at every stage of the supply chain and may be imposed only on the consumer. Many countries have both a comprehensive GST/VAT and a sales tax. In Canada, for example, some provinces have what the Canada Revenue Agency calls a "harmonized GST and HST," the latter being a provincial sales tax that is harmonized with the country's federal GST. In provinces that have not elected to combine the two, there are two separate taxes -- the federal GST and a provincial sales tax.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered almost 3 years ago

--One difference which is worth noticing is the reduced cost which a trader would incur under the **GST **regime as compared to what would be his outflow until the GST is implemented.Under the **VAT** system of claiming tax credit,a trader is not allowed to deduct the amount of service tax paid by him on the input services --VAT is levied on goods whereas GST on both goods & services as it is evident from the name. -- VAT laws are different from state to state GST is made to remove the state differences in the Taxation. --GST would have a uniform rate in all the states which VAT lacks as each state levies it rate of duty for each goods.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered almost 3 years ago

The value added tax system, unlike the conventional sales tax system, efficiently addresses the problems of cascading and input tax credit that causes an automatic hike in the consumer price level. The incidence of cascading is avoided in VAT as the tax is imposed on the value addition at every stage of production. The final consumers are the ultimate bearers of the burden. This indirect yet coherent form of taxation involves transparency and is therefore easily comprehensible. Understanding the differences and details of these two different approach can be challenging. You may require help with taxes from accountants or tax professionals. The economic effect of VAT falls on the final prices of the goods and services while sales tax relies on the final sale to the customers. The value added tax system requires an effective accounting. To deal with this disadvantage, the same tax is charged to each member involved in the production of the goods and services. The implementation of the tax remains indifferent to the position of the member in the production cycle or its position with respect to the customers.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered almost 3 years ago

--VAT(Value Added Tax) is a type of Indirect tax which is collected by respective State. GST (Goods and Service Tax) it is also a type of Indirect tax which is imposed by central with some powers handled by states. -- VAT is applicable on sale of Goods it may be within state sale or CST(outside state) sale. GST is also applicable to sale of goods and also it is applicable for any service provided by a service provider. -- VAT laws are different from state to state. GST is made to remove the state differences in the Taxation.

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Open uri20170510 32134 1c996lj?1494421732 Anil answered about 3 years ago

The mechanics of applying VAT and GST are basically the same. Following the pure definition VAT is applied to tangible goods and GST is applied to both Goods and Services, but reality is the two terms are often use interchangeably. One difference which is worth noticing is the reduced cost which a trader would incur under the GST regime as compared to what would be his outflow until the GST is implemented.Under the VAT system of claiming tax credit,a trader is not allowed to deduct the amount of service tax paid by him on the input services Often referred to as the "goods and service tax", the Value Added Tax is distinctly different from the sales tax levied on exchanges. The Value Added Tax is a form of indirect tax that is imposed at different stages of production on goods and services. VAT is levied on the import goods as well and the same rate is maintained as that of the local produce. Most of the European and non-European countries have adopted this system of taxation. The transparent and neutral nature of taxation has prompted VAT to emerge as one of the robust revenue raisers in these countries. Sales tax, as compared to VAT is the percentage of revenue imposed on the retail sale of goods. Unlike VAT, sales tax is levied on the total value of goods and services purchased. The value added tax system, unlike the conventional sales tax system, efficiently addresses the problems of cascading and input tax credit that causes an automatic hike in the consumer price level. The incidence of cascading is avoided in VAT as the tax is imposed on the value addition at every stage of production. The final consumers are the ultimate bearers of the burden. This indirect yet coherent form of taxation involves transparency and is therefore easily comprehensible. Understanding the differences and details of these two different approach can be challenging. You may require help with taxes from accountants or tax professionals. The economic effect of VAT falls on the final prices of the goods and services while sales tax relies on the final sale to the customers. The value added tax system requires an effective accounting. To deal with this disadvantage, the same tax is charged to each member involved in the production of the goods and services. The implementation of the tax remains indifferent to the position of the member in the production cycle or its position with respect to the customers. The system of taxation under VAT is also successful in avoiding tax evasions that is frequent in sales tax. Sales tax is often considered a burden if the percentage charged goes beyond 10% and is subjected to evasion by the consumers who engage in buying products through the internet and other activities such as buying at wholesale or through an employer. Although tax evasion is not possible in VAT, it is subjected to other fraudulent practices such as carousel fraud. This is one of the prominent practices of theft of the value added tax. It is prevalent in the nations where the movement of goods between jurisdictions is exempt from VAT. The fraudster is often found levying VAT on products and evading its payment to the government. Such practices are a heavy loss of tax incomes for the governments. VAT is one of the newest instruments of the global economy and is widely accepted and implemented in most of the nations. However, VAT poses constraints in developing countries such as India. The predominance of low per capita income in these nations poses a difficulty for the governments to earn revenue through income tax. As compared to VAT, sales tax is a major revenue earner for the regional governments in such countries.

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Open uri20170510 32134 tcchcu?1494421832 Jitendra Suthar answered about 3 years ago

Hiiii friend..... --VAT(Value Added Tax) is a type of Indirect tax which is collected by respective State. GST (Goods and Service Tax) it is also a type of Indirect tax which is imposed by central with some powers handled by states. -- VAT is applicable on sale of Goods it may be within state sale or CST(outside state) sale. GST is also applicable to sale of goods and also it is applicable for any service provided by a service provider. -- VAT laws are different from state to state. GST is made to remove the state differences in the Taxation. -- VAT rates differ on various types and goods. GST is made to make a single rate in all the states. But there is some provisions pertaining to interstate sales which may differ the intrastate sale. And in both the cases of VAT and GST the ultimate burden of tax is borne by the customer only as it is a type of Indirect tax. Read more about GST act here.click this link [GST in India] https://www.cakart.in/blog/introduction-indian-gst/ Regards,

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 lochan answered about 3 years ago

**VAT AND GST** VAT is levied on goods whereas GST on both goods & services as it is evident from the name GST would have a uniform rate in all the states which VAT lacks as each state levies it rate of duty for each goods. Input credit can be set-off only against the goods sold within the state whereas incase of GST not only you can set-off input credit against goods sold within the country but also against the services. Thanks

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 himanshu answered about 3 years ago

(1) Value Added Tax (VAT) is one of the indirect taxes that is levied by the state government on tangible goods Goods and Services Tax (GST) is an umbrella tax that seeks to subsume all indirect taxes (2) VAT Aplicable only on manufactured goods, GST include all services. (3) VAT is value added tax (only products. GST is like VAT but applies to Services also (i.e products + services). Kind Regards himanshu raj

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Vinod.P answered about 3 years ago

Hi Marudhachalamurthi Angappan VAT means Value Added Tax which is form Indirect Tax levied by state governments on sale of goods within the state.In case of Interstate sales CST( Central Sales Tax) will be collected. GST means Good and Service Tax which is proposed to be collected by the Central Government for sale of goods or services provided. VAT will be collected on each point of sale for the value addition made and it will be charged at a specified rates fixed by the state government. The burden of vat will be comes on the shoulder of the ultimate consumer. Kind Regards Vinod.P

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Marudhachalamurthi commented over 1 year ago

The burden of vat will be comes on the shoulder of the ultimate consumer. What about GST?

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