{"id":11865,"date":"2020-07-01T12:49:56","date_gmt":"2020-07-01T07:19:56","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=11865"},"modified":"2021-01-15T12:34:58","modified_gmt":"2021-01-15T07:04:58","slug":"difference-between-vat-and-gst","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/difference-between-vat-and-gst\/","title":{"rendered":"A Brief Coverage on the Difference between VAT and GST"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Gaining insights on the <strong><em>difference\nbetween VAT and GST<\/em><\/strong> would help the household consumers, and the\nbusinesses get familiar with the seamlessness that the GST tax regime offers.\nOn <strong><em>July\n1, 2017<\/em><\/strong>, the implementation of goods and service tax took place, and it\ncame with a different philosophy, i.e., one nation, one tax. <\/p>\n\n\n\n<p>Various forms of Central and State indirect taxes like service tax, VAT, and excise duty got levied on all the steps of product value addition, thereby creating a <strong><em>cascading effect.<\/em><\/strong> However, the advent of <a href=\"https:\/\/corpbiz.io\/gst-registration\"><strong>goods and service tax<\/strong><\/a> in the field of the taxation system has subsumed indirect taxes like service tax, VAT, octroi, and excise duty in India.<\/p>\n\n\n\n<p>Goods and service tax have brought uniformity all over India through a <strong><em>single unified tax<\/em><\/strong>, making sure that the unrestricted flow of tax credit will prevail. The purpose of the introduction of the GST regime is the fact that it would bring down inflation in the economic system. Gear up to learn about the difference between VAT and GST, along with their implications.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-vat-and-gst\/#Difference_between_VAT_and_GST\" >Difference between VAT and GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-vat-and-gst\/#What_do_you_understand_by_Cascading_Effect\" >What do you understand by Cascading Effect?&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-vat-and-gst\/#VAT_and_Its_Drawbacks\" >VAT and Its Drawbacks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-vat-and-gst\/#Benefits_of_GST_Implementation\" >Benefits of GST Implementation<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/difference-between-vat-and-gst\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Difference_between_VAT_and_GST\"><\/span>Difference between VAT and GST <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The difference between VAT and\nGST is stated in the points given below-<\/em><\/strong><\/p>\n\n\n\n<ul><li>The\nVAT gets charged at the sale point. On the other hand, GST gets levied at the\ngoods and services supply point. <\/li><li>VAT\nis a system that is a summary based, while GST is a tax system that is\ntransaction-based. <\/li><li>VAT\nis a direct tax levied on the value addition on manufacturing as well as\nproduction stages of goods and services, whereas GST is a singular tax levied\non the sale along with the consumption of goods and services.<\/li><li>In\nthe VAT system, the responsibility of revenue collection lies in the hands of\nthe seller, while in the case of the GST system, the responsibility of revenue\ncollection lies in the hands of consumers. <\/li><li>In\nthe case of the VAT system, there is no applicability of Input Tax Credit. On\nthe other side, there is the applicability of Input Tax Credit under GST.<\/li><\/ul>\n\n\n\n<p><em>Besides this, we are covering the difference between VAT and GST through example along with answer to the question that shows an edge of GST over VAT.<\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Example-Based Concept about the Difference\nbetween VAT and GST<\/h3>\n\n\n\n<p><strong><em>Let&#8217;s suppose that a consultant extends different types of support to his customers.<\/em><\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Under VAT Regime<\/h4>\n\n\n\n<ul><li>The consultant charged a 15% professional tax on\nthe service being provided of Rs 60,000. Thus, his output tax was 60,000*15%=\nRs 9,000.<\/li><li>After that, in case he went on purchasing\nsupplies related to the office for 25,000 INR goes on paying 5% as VAT. The\nresultant figure was- 1250 INR (25000*5%)<\/li><li>In this case, he had to make the payment of Rs.\n9,000 output service tax. Furthermore, no deduction would get availed of 1250\nINR paid on stationery. <\/li><li>The total tax outflow for the consultant will be\nRs. 10,250.<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\">Under GST Regime <\/h4>\n\n\n\n<ul><li>The consultant charged an 18% professional tax on the service being rendered of Rs 60,000. <\/li><li>Therefore, the output tax was 60,000 INR * 18%= Rs. 10,800.<\/li><li>After that, in case he went on purchasing supplies related to the office for 25,000 INR goes on paying 5% as GST. The resultant figure was- 1250 INR (25000*5%)<\/li><li>In this case, he had to make the payment of Rs. 9,550(Rs. 10800- Rs 1250). It has happened because, under GST, there is a provision regarding the deduction of tax paid on supplies from the output tax on services provided.<\/li><\/ul>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/input-service-distributor-under-gst\/\">Concept of Input Service Distributor under GST<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_do_you_understand_by_Cascading_Effect\"><\/span>What do you understand by Cascading Effect?&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In simple words, a cascading tax is nothing but a tax on top of a tax. Cascading effect of tax gets produced where a tax gets charged on the tax levied on a product on all the steps of the sale. It has been considered as one of the key distortions in the <em><strong>taxation system of India<\/strong><\/em><sup><a href=\"https:\/\/www.investindia.gov.in\/taxation\"><strong>[1]<\/strong><\/a><\/sup>. The tax gets imposed on a value encompassing tax paid by the previous buyer. For this reason, it makes the end consumer go on paying tax on already paid tax. GST applied brake on the cascading tax effect and also restricted its <strong><em>compounding effect<\/em><\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"VAT_and_Its_Drawbacks\"><\/span>VAT and Its Drawbacks<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>VAT is an indirect value-added\ntax levied on various stages of production, as well as the distribution of\ngoods. The introduction of value-added tax into the taxation system of India\ntook place on <strong><em>1 April 2005<\/em><\/strong>. It was the replacement of sales tax in the form\nof a taxation concept. <\/p>\n\n\n\n<p>It came into existence with the\nmission to turn India into a single integrated market. After its\nimplementation, it became a major revenue-generating source for all the States\nof India and UTs with two exceptions, i.e., <strong><em>Lakshadweep, and Andaman and the\nNicobar Islands<\/em><\/strong>. VAT has got the recognition as a consumption tax since\nit is borne by the end consumer.<\/p>\n\n\n\n<p><strong><em>The main drawbacks associated\nwith value-added tax are- <\/em><\/strong><\/p>\n\n\n\n<ul><li>Different VAT laws in all the states<\/li><li>Cascading tax effect<\/li><li>Claiming for Input Tax Credit on services under\nvalue-added tax was not a possibility <\/li><li>The difference in VAT rates in different states\nmade the taxation process complex<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Benefits_of_GST_Implementation\"><\/span>Benefits of GST Implementation<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Goods and service tax has brought\nrevolutionary changes in the tax system of India. It&#8217;s a <strong><em>unified, single,\ndestination-based taxation system<\/em><\/strong> that is bringing unification in the\nwhole nation in terms of ways through which collection to tax takes place in\nIndia. In the coming years, GST will stimulate the growth of the Indian\neconomy. It has simplified the processes and measures concerning the indirect\ntax system. It&#8217;s not wrong to say that GST implementation is like a reform in\nthe taxation process of India. <\/p>\n\n\n\n<p><strong><em>The benefits of GST implementation are-<\/em><\/strong><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"576\" height=\"522\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/07\/image-2.png\" alt=\"benefits of GST implementation\" class=\"wp-image-11867\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/07\/image-2.png 576w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/07\/image-2-300x272.png 300w\" sizes=\"(max-width: 576px) 100vw, 576px\" \/><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An in-depth understanding of the <strong><em>difference between VAT and GST<\/em><\/strong>, along with the GST implementation benefits, is vital for businesses as well as consumers in India. The concept of GST is much beyond the confines of VAT as it comprises all the things which fell under the range of indirect taxes. It is serving a <strong><em>friendlier indirect tax regime<\/em><\/strong> in India. To gather additional information on the difference between VAT and GST or to get any help regarding GST registration, you can consult our experts at <em><a href=\"https:\/\/corpbiz.io\/\">Corpbiz<\/a><\/em>.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/aar-applicability-of-gst-its-registration-for-charitable-medical-stores-and-security-service\/\">\nAAR: Applicability of GST &amp; its Registration for Charitable Medical Stores &amp; Security Service\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Gaining insights on the difference between VAT and GST would help the household consumers, and the businesses get familiar with the seamlessness that the GST tax regime offers. On July 1, 2017, the implementation of goods and service tax took place, and it came with a different philosophy, i.e., one nation, one tax. Various forms [&hellip;]<\/p>\n","protected":false},"author":19,"featured_media":11877,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[717],"acf":{"service_id":"68"},"authorName":"Margesh Rai","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2024\/03\/Margesh.png","authorDescription":"With 10+ years of creative writing experience and 500+ blogs and thought leadership articles to his credit, Margesh Rai has left a significant impact in the field of content marketing. A published author and poet, Margesh Rai has experience writing for 20+ segments, such as Legal, Fintech, SAAS, Dairy, Real Estate, Hospitality, Recruitment, Sustainability, etc.","postViews":6982,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/11865"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=11865"}],"version-history":[{"count":19,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/11865\/revisions"}],"predecessor-version":[{"id":24222,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/11865\/revisions\/24222"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/11877"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=11865"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=11865"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=11865"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}