GST stand for the Goods and Service Tax. It was introduced in India on July 01, 2017, which subsumed most Indian indirect taxes. Today, GST's contribution towards Indian GDP is way ahead of Direct taxes. Its implementation in the Indian economy, though, was a roller coaster ride because there was no exclusive law for Service tax. Hence the implementation of GST is considered as one of the most significant transformations in the Indian Taxation System.
On the other hand, UAE VAT or the Value Added Tax, was initiated in Dubai and came into effect on January 01 2018.
One thing common about GST and VAT is that they both are based on the theory of payment of tax on any form of value additions made on the product or service by its supplier.
Another common thing about both these taxes is that they both are location-based and are synonymous to Indirect Tax.
Now, when it comes to differences between the two, both GST and VAT have their unique features. Below, we shall discuss all the parameters that make GST different from VAT.
Mentioned herewith are some of the significant differences between GST and VAT:
|Parameter||GST- India||VAT- UAE|
|Tiers in tax||Under the GST regime there are three different tiers of taxes i.e., IGST, CGST and SGST.||VAT was introduced in UAE to provide an alternative stream of income for the Government. There is only one tier of tax i.e., VAT.|
|Rates of tax||Although GST was introduced to develop 'one nation one tax', there are multiple tax rates under the GST act being 5%, 12%, 18% and 28%, for different industrial and service sectors.||The UAE based VAT system has much more simplified rates. It follows a constant tax rate that is 5% on any form of value additions made by the supplier of the goods and services with a few exemptions.|
|Registration||Suppose the same company transports the goods or services to any of their showroom/ office or warehouse, located in different states or union territory. In that case, they have to take separate registration in that state. Such transfer of good or service shall be treated as a supply of goods from one registered branch to another registered branch.
Moreover, the invoice generated will be considered a sale from one registered office and a purchase to another branch.
|Only one registration is required even if the same company has multiple offices in different states. Moreover, VAT also offers a group VAT registration for people related to each other in the business.|
|Returns||The registered person must file the GST returns monthly or quarterly in the form of GSTR- 3B and GSTR- 1. Also, annual returns need to be filed on yearly basis.||VAT return filing is generally done on a quarterly basis. However, in some exclusive cases, it might occur on a monthly basis for the specific type of businesses.|
|ITC Eligibility||Registered business can claim input tax on goods and services used by the businesses for the purpose of trade. ITC can even be claimed on the exports and zero-rated supplies.
Supporting documents must be available to claim the input tax. ITC can only be claimed when the supplier has filed his/ her return.
|For VAT to be claimed as input tax the goods and services must be used for the purpose of trade to make taxable supplies only and must not be exempt supplies. Tax invoice should be should be received and kept by the claimant relating to the goods and services for which ITC is being claimed. The invoice must have been paid or intended to be paid within 6 months of agreed payment date.|
|Law||GST laws are systematic, and elaborate, wherein all the notifications are issued by the ministry of finance on a regular basis, thereby giving a detailed understanding of any newly introduced amendment or the law.||The UAE VAT law is concise and precise and not that specific. They are not written in a formal and systematic manner.|
|Reverse Charge Mechanism||Under the GST law importer needs to pay taxes on the applicable rates on the import of goods and services. After the payment is done then only the businesses can claim the related input credit.||Under the UAE VAT importer need not pay cash for the tax on reverse charge basis. The tax is deemed to be paid and taken credit for. Finally, the tax is paid to government when the goods and services are finally sold in the country. This reduces the net cash requirement for the businesses.|
In conclusion, it can be said that considering the level of complexities of the taxation system in India and the UAE, there are undoubtedly certain good things about the UAE VAT taxation system. Still, some sections definitely need amendments, and the same applies to the Indian GST system.
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