GST stands for Goods and Services Tax, a value-added tax levied on the supply of goods and services. Like VAT, GST is a consumption tax that is paid by the end consumer, but it is collected and remitted to the government by businesses at each stage of the supply chain.
VAT stands for Value-Added Tax, which is a type of consumption tax that is applied to the value added at each stage of the production and distribution chain of a good or service. In other words, VAT is a tax on the value added to a product or service at each stage of its production and distribution, from raw materials to the final sale to the consumer.
VAT is usually collected by businesses on behalf of the government, and it is typically calculated as a percentage of the selling price of a good or service. The VAT rate can vary depending on the country and the type of product or service being sold. VAT is a significant source of revenue for many governments around the world. The cascading effect of taxes, the unfeasibility to claim Input Tax Credit (ITC) on service VAT, and different tax laws in different states are the major disadvantages of the VAT tax regime.
GST is designed to be a single, destination-based, and comprehensive taxation concept. Goods and Services Tax (GST); the tax collected is uniform in the entire country. GST has helped to get rid of the concept of “tax on tax” system and revolutionized the whole Indian taxation system.
How is GST Implementation beneficial?
Goods and Services Tax (GST) has several advantages over Value Added Tax (VAT). Here are some of the key benefits of GST:
Simpler tax system: GST replaces multiple indirect taxes with a single tax, making the tax system simpler and more streamlined. It eliminates the need for businesses to comply with different tax laws in different states.
Reduced cascading effect: GST eliminates the cascading effect of taxes on the cost of goods and services. This means that businesses can claim credit for the tax paid on inputs, which reduces the overall tax burden and makes goods and services more affordable.
Improved compliance: GST makes it easier for businesses to comply with tax regulations, as it simplifies the tax system and reduces the paperwork and record-keeping requirements. This can help reduce the cost of compliance and improve tax compliance rates.
Increased tax base: GST has the potential to increase the tax base, as it can bring more businesses into the tax net and reduce tax evasion. This can help increase the government’s revenue base and improve fiscal sustainability.
Boost to the economy: GST can provide a boost to the economy by making goods and services more affordable and reducing the cost of doing business. This can help increase consumption and investment, leading to higher economic growth and job creation.
Overall, GST is considered to be a more efficient and effective tax system compared to VAT, as it simplifies the tax system, reduces the tax burden on businesses and consumers, and improves compliance and revenue collection.