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VAT\CST

VAT (Value Added Tax)

A value added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the value added to a product, material, or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs.

The value added to a product by or with a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products.

VAT was introduced into the Indian taxation system from 1 April 2005.

 

CST (Central Sales Tax)

The central sales tax (CST) act,1956 was enacted which came into force on 5/1/1957.originally, taxes on sales or purchase of goods in the course of inter-state trade or commerce were brought expressly within the preview of the legislative jurisdiction of parliament .

The entire revenue accruing under levy of CST is collected & kept by the state in which the sale originates. The act excludes taxation of imports & exports.

CST being an origin based tax, is inconsistent with VALUE ADDED TAX which is a destination based tax with inherent input tax credit refund. The rate of CST on interstate sales to government will be same as VAT/STATE Sales tax rate .