GST and VAT are both counter approach taxation system by the government to the held valuation of goods and services across the nation. Talking about the older tax system, i.e. value added tax it was the earlier method of applying taxes on the general public while the goods and services tax is held to change this course of action towards the consumers.
There are a number of differences between GST and VAT:
The value-added tax is also a summary based tax in which the taxpayers were held to submit their tax return on a certain period of time with a summary of sales and purchase. While in the Goods and service is a transaction based tax system which will need to submit sales transactions everything on time with complete and correct data.
The earlier VAT was an offline mode of taxation in which a person has to file a return on an actual file and has to submit in-person at income tax department nearby with an accountant attested statement. While the goods and services are totally based upon online medium and will take each and every returns and tax data online with matching concept.
Another aspect of quality reporting is the ability to be able to check how sales are doing at your store from anywhere anytime. That means if you’re away from your store you should be able to check net sales, transaction counts, average sales value, and the total number of customers, in real time directly from your phone or tablet.
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.
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.
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.
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.
Under GST law the biggest problem of ITC mismatch will get solved as all the details of sales will be filed till the 10th day of next month and all the details of purchases will be filed by 15th of next month and monthly return will be filed by 20th of next month. So as all the details will be timely filed and then the monthly return will be filed so all the details will be cross-tallied.
While under VAT system there is a very big issue of ITC mismatch as there is no such system for filing details of sales and purchase by some specified date before filing the VAT return which gives rise to Input tax credit mismatch.
Thus, there are a number of differences between GST and VAT. And GST will be a probable solution for different issues in VAT system.