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Compare Central Sales Tax (CST) and Value Added tax (VAT)
Central sales tax (CST) is charged by the central government on interstate sales and collected by the state in which sales are made. Value added tax (VAT) is the multipoint tax collected at different stages of production and distribution.
Central sales tax
Central sales tax (CST) comes under indirect tax levied by either central government or state government on sales. Retailers are responsible for collecting these taxes from customers and submit them to tax authorities.
Central government levied tax on interstate sales whereas the state government levied tax on intrastate sales. Charges depend on commodities and can vary depending on commodities. Not all commodities fall under sales tax range, some may have tax exempt.
Value added tax
Value added tax (VAT) is charged on commodity value addition. Tax inputs are local purchases made from dealers (registered) and tax outputs are within state tax on sales.
VAT is also termed as the difference between total tax output and total tax input.
It is a multiple level tax charged at each point of production and distribution. This tax also comes under indirect tax. Variants of VAT are Gross product variant, consumption product ariant and income variant. VAT is calculated using methods like addition, subtraction and invoice method.
Differences
The major differences between Central Sales tax (CST) and Value Added Tax (VAT) are as follows −
| Central Sales Tax (CST) | Value Added Tax (VAT) |
|---|---|
| Charges on commodities, when the sale is done. | Charges whenever value is added to a product. |
| Nature is a single point tax. | Nature is a multi point tax. |
| Tax evasion. | No tax evasion. |
| It has a cascading effect. | No cascading effect. |
| Tax levied on total value. | Tax levied on value added. |
| Less effort is required in maintaining accounts. | Complex in maintaining accounts. |
| Tax burden on consumers. | Tax burden is rationalized. |
| No input tax credit. | Available input tax credit. |
| Applies to the total country. | Applies to state jurisdiction. |
Conclusion
First VAT was introduced as modified value added tax (MODVAT) in the year 1986 and central value tax (CENVAT) was introduced in the year 2000. Haryana is the first state to implement VAT and later followed by other states.
Due to lack of transparency and some other reasons, sale tax has some controversies.
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