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  • Category: Career Guidance

    GST or VAT ! What is the difference?

    Want to know the difference between GST and VAT? Looking out for the major differences among them? Check out this Ask Expert page and understand how GST is better than VAT.

    As we know all over in India people are saying that due to GST their business is suffering a lot. Can someone tell the difference between VAT(Value AddedTax) and newly introduced (Goods and Service Tax)?

    Is GST better than VAT?

    Mrs Bharti Gupta
    (New Isc member)
  • Answers

    8 Answers found.
  • VAT: Value added tax
    GST: Goods and service tax.
    Earlier days there are double taxation system was in force. Central Excise duty and sales tax. If the sales is with in the state state government sales tax was levied. If it is in between two states central sales tax was applicable. These rates were varying from state to state. In addition excise duty was also applicable.
    One country one tax system has been brought in to existence by removing all taxes only one tax that is GST is brought into force.
    By these taxes all over the country one product one rate system has come in to force.All the benefits available under GST scheme are also passed on to the tax payer .The benefits of this system will be known after a few months to all the public

    always confident

  • VAT is earlier tax system and it along with some other taxes like service tax, excise tax, sales tax and octroi have been abolished and in its place a new single tax has been introduced wef Jul 2017 which is GST.

    This will make the system easy to operate and will avoid double taxation. Moreover Govt is hopeful to collect more tax revenues once the system is fully understood by the business community and computerisation becomes smooth and user friendly.

    This was being tried to be introduced for quite sometime but due to issues raised by states it was delayed and finally the issues resolved and it is introduced this year.

    Knowledge is power.

  • VAT stands for value added tax. And this is the system where each state had it's own rate for the type of products and the services being sold. You can see that it was the old system where each state had their own rates and people were paying different VAT across the states. To handle the double taxation and other hidden taxes that includes LBT, the center came up wiht new tax system known as GST.

    GST stands for goods and services tax. Here the tax for your service and the goods will have same rate across states and inter state transaction. Those tax rates will be governed by the center every year. And the GST has two brackets SGST and IGST. So depending on the changes the rates for products and services will have to start from that. Each year the government may decide the rates of those GST brackets. And things will be affected as such.

    Think of GST as single nation and single tax. This is a good system for customers and both sellers. But it's complexity requires a lot of education at this current implementation phase.

  • Govt has rationalized and simplified the tax structure related to sale of goods and delivery if services. Earlier various taxes like sales tax and VAT any many others were there and created a lot of confusion and manipulations by people concerned.
    Now everything is replaced with one single tax called GST (goods and services tax). It is believed that it will be very easy to use as well as easy tracking by Govt to find out who is hiding payment of taxes.
    It will take time to adjust with this new system and people who have no knowledge of GST have some apprehensions about it. In due course its real effect on business and economics will be seen.

    Thoughts exchanged is knowledge gained.

  • In the earlier VAT, the tax was on the value of the transaction. This in effect was tax on tax already paid. That means the tax was progressively increasing. This caused a 'Tax cascading effect".

    In GST, as the previous input tax is netted,the further tax is only on the incremental value. There is no tax on tax. So the netting gives immediate relief to the trader and results in a reduced cost escalation for the final buyer, provided both rates are same.) With the GST the erstwhile VAT is subsumed and no longer operative.

  • While GST is termed as General Service Tax, and the VAT is termed as Value added tax. GST is the one time wholesome levied tax at the point of manufacturing or initiating of service. Where as the VAT is added to already charged tax citing other reasons for collecting such extra tax. Prior to GST , the states were given free hand and they were levying VAT at their whims and fancies and that resulted in too much increase of certain goods and services. The most glaring example is the taxing of Petrol and Diesel. The center had one rate and the state used to impose VAT as additional charges and were shelling down more those days.

    K Mohan
    'Idhuvum Kadandhu Pogum "
    Even this challenging situation would ease

  • Actually the misconception that is being generated that the prices will be high after GST is wrong. This is beneficial to the common man but business men who were involved in not paying tax are in trouble as now GST includes tax since its origin from the manufacturing unit.
    One more thing about GST is that it is not a tax on tax rather it a single tax. It is classified into Central GST and State GST/UT GST.

  • VAT stands for Value added tax and GST stands for Goods and service tax.VAT is applicable for goods sold and not for the services but GST is applicable for both goods and services.VAT is the tax a manufacturer has to pay for the additional value created.GST is essentially riding on the VAT calculation but with uniform taxation across goods and services.The GST is a dual taxation regime, where the only two components will be Central GST (CGST) and State GST (SGST).GST is another name of VAT but it taxes both goods and services at the same rates. It eliminates many disputes which arises due to taxing goods and services separately.The main purpose of GST is to eliminate the dispute of taxing goods and services separately.The value added tax is also a summary based tax in which the taxpayers were held to submit their tax return on a certain period of time with summary of sales and purchase. While in the Goods and service is a transaction based tax system which will need to submit sales transactions everything on time with complete and correct data.Under GST, taxable person will be required to file the details of all the sales electronically by 10th day of every month in GSTR-1 succeeding the taxable month and simultaneously he has to file the details of all the purchases by 15th day of month in GSTR-2 succeeding the taxable month and he has to file the monthly return in GSTR-3 by 20th day of every month succeeding the taxable month. And annual return should be filed up to 31st December in GSTR- 8 of next financial year.

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