Notification Concept of Local Sales Tax(LST),Central Sales Tax (CST), Value Added Tax(VAT) i.e. History of Indirect Taxes, Why LST Changed to VAT and why VAT Changed to GST
Financial Year: 2017
BASICS ABOUT TAXES
(a) Indirect Taxes
(b) Direct Taxes
|
Indirect Taxes State Govt |
Indirect Taxes Central Govt |
Direct Taxes Central Govt |
|
Local Sales Tax (LST) |
Central Sales Tax (CST) |
Income Tax |
|
VAT |
Excise |
Wealth Tax |
|
|
Service Tax |
|
Local Sales Tax:-
Sales tax is collected from manufacturer itself and nobody else like distributor or retailer collects tax.
| Particulars | A Manufacturer |
B Distributor |
C Retailer |
| Sales | 100 | 150 | 180 |
| Tax | 18 | 0 | 0 |
No sales tax on distributor and retailer, Whole taxes have to be paid by Manufacturer Only
VAT
| Particulars | A Manufacturer |
B Distributor |
C Retailer |
| Sales | 100 | 150 | 180 |
| VAT | 10 | 15 | 18 |
Haryana Government will receive 18 Rs as Taxes in both the cases
(a) LST:- Whole 18 Rs to be paid by A and No Taxes to be paid by B and C
(b) VAT:- Taxes to be paid on Value Addition
A will pay 10 Rs
B Will Pay 15-10 = 5 Rs
C Will Pay 18-15 = 3 Rs,
ITC (Input Tax Credit)
A Zero
B 10 Rs
C 15 Rs
LST and CST
| Particulars | A Delhi Manufacturer |
B Haryana Distributor |
C Haryana Retailer |
| Sales | 100 | 150 | 180 |
| CST | 10 | 0 | 0 |
| VAT | 0 | 15 | 18 |
Since Goods moved from one state to another Central Govt will receive 10 Rs from A Manufacturer
Haryana Govt will not give any Input Tax Credit since taxes have been deposited with Central Govt.
(a) Haryana Govt will Receive 15 Rs from B
(b) Haryana Govt will Receive 18-15= 3 Rs from C, Since B has sold within the state so input tax credit will be allowed to C for taxes paid by B.
So in Nutshell
(a) CG will receive 10 Rs as LST
(b) SG will receive 18 Rs from B and C
This 10 Rs taxes paid in interstate transactions for which input tax credit is not allowed is also known as cascading effect on taxes or tax on taxes.
Question 1:-
|
Particulars |
A Delhi |
B Delhi |
C Delhi |
|
Sales |
500 |
1000 |
2000 |
|
VAT |
50 |
100 |
200 |
|
Total |
550 |
1100 |
2200 |
|
Delhi Govt |
?? |
?? |
?? |
|
Input Tax Credit |
?? |
?? |
?? |
Please post answer in comment section on youtube channel.
Link for Youtube Video
https://www.youtube.com/watch?v=neP-i-VYafM&t=57s
Thanks
CA Rahul Gupta
Chairman@carahulgupta.com