GST vs VAT: Simple Way to Describe the Differences

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GST vs VAT: Simple Way to Describe the Differences 2017-05-08T11:13:44+00:00

GST India Forum – Goods and Services Tax (GST) in India Forums Discussion GST vs VAT: Simple Way to Describe the Differences

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  • GST HelplineGST Helpline
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    After the introduction of GST, indirect taxation system of India will be subsumed under GST because a line of different taxes will be covered in a single tax law which is GST (Goods and Service Tax). Before GST the main indirect taxation which is generally used are VAT, Service Tax, Excise etc. Where VAT is a tax which is added at each point of time that is from the time of manufacture up to the time of sale. Tax is added at each stage when the value is added that is why it is called value added tax.
    There are a number of differences between GST and VAT:

    Return to be Filed:


    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.


    While In present VAT system the seller has to file quarterly VAT returns and at the same time assessee has to file Sales register and purchase register. And at the end of the year, the assessee is liable to file annual return too. In many states generally, Vat dealer is liable to file quarterly returns but in some states like Maharashtra and Karnataka there is monthly return provision too.

    Input Tax Credit


    After the introduction of GST Law, this cascading effect will be eliminated because in GST we can take Cenvat Credit of interstate sales Purchase as well as in GST we can take credit even after sales of Services. Thus the prices of Goods and services become low and ultimately the inflation rate become down and economic growth will increase.


    While under VAT system tax credit for CST cannot be taken against VAT payable so it leads to cascading effect i.e. tax on tax.

    Cost Reduction:


    The introduction of GST law will ultimately result in cost reduction of goods as there will be a single tax levied that is goods and service tax.


    While under VAT law a trader cannot utilize credit of other indirect taxes like service tax credit etc. for payment of VAT liability so it will result in an increase in the cost of goods.

    Tax on Interstate Sales


    Under GST law IGST will be levied in case of inter-state sale and purchases


    While under VAT Law CST is levied on inter-state purchase and sales of goods.

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