The difference between central sales tax (CST) and VAT

Taxes are a means through which governments collect money from their people, in order for the cycle of economy and public services at the state to function properly.

In fact, taxes are of many types, the article at hand is handling the explanation of the difference between two important ones, Central Sales Tax (CST) and VAT.

The indirect tax that is levied by the central or state government when it comes to the sale or purchase of merchandise is known as Central Sales Tax (CST).

It’s an indirect tax because its weight rests on the consumer, however the burden to recover it from the consumer and give it to the tax authorities rests on the retailers and the ones who sell the goods.

Acknowledging that there are many commodities that are beyond the range of this tax which is why it’s not applied on them. Such tax is usually forced in luxury goods and expensive items, and less charged on basic needs.

the sum of money or tax that is charged on the value addition to the commodity by every party is the so-called VAT. In a simplified way, in it the difference between the total output tax and total input tax. 

The tax, which is charged on the value addition to the commodity by each party is known as VAT. In other words, it is the difference between total output tax (tax on the output) and total input tax (tax on the input). Those taxes are made within state.

VAT used for Value Added Tax, it is a multilevel tax involving the charges that are added when transactions take place during every single step of production and distribution. 

VAT is a destination and a consumption based tax, because it falls on the consumer, however the ones who pay it are the retailers and the sellers. 

VAT includes three variants, which are Product Variant, Income Variant and Consumption Variant.

1. Sales Tax is a tax on sales. Value Added Tax is a tax on value addition done by each party of the supply chain like supplier, producer, wholesaler, distributor or retailer.

2. Sales Tax is a single-stage tax, but VAT is a multi-stage tax.

3. In VAT, the chances of tax evasion are very less as compared to Sales Tax in which evasion of tax can be done easily.

4. Double taxation is always there in case of Sales tax, whereas VAT is totally free from cascading effect.

5. The sales tax is levied on total value, but in VAT tax is charged only on the value added to the commodity.

6. Sales Tax is easy to calculate while VAT calculation requires time and effort.

7. In Sales Tax, the tax burden is borne by the consumer. On the other hand, the tax burden is rationalized.

8. The authority of levying sales tax is in the hands of both Central Government and State Government, but VAT is levied by the State Government only.