Difference between VAT & Sales Tax


difference brtweenDifference between VAT & Sales TAX: The Value Added Tax (VAT) and Sales Tax both are consumer tax, which means that both have to be paid after purchase of a product. VAT is an indirect tax while sales tax is a direct tax. At the different stages of goods production and services VAT is levied. The VAT is applicable for both the import goods and local products. VAT emerged as one of the most efficient way to generate revenue in most of the countries because of it neutral and transparent nature.

Read more: What you need to know | VAT


VAT is a indirect and multilevel tax, It is charged each and every point of production and distribution, when the transactions take place. VAT is a destination based tax.

In VAT, the registrants have to pay the tax to government in every month which they collected from consumers, deduct what they paid to vendors if any. By a particular date the payment details should be provided to Commercial Taxes Department (either monthly or quarterly, depending on the state).

As compared to VAT, sales tax is imposed on the retail sale of goods.  Sales tax is imposed on the total value of goods and services purchased. At the time of purchase of services and products sales tax is imposed. The consumer knows how much they are going to pay as sales tax, because it is easily calculated. Sales tax depends upon states, cities or local municipalities and what types of merchandise or services.

Sales tax is paid by end consumers on their consumption. The sales tax is transferred to the government at the final stage by the seller.  Until the final sale is made to the customer Tax jurisdictions do not receive.

Strict rules are there to be followed in sales tax. It is easy to collect and have high compliance rate. Sales tax evasion is very high.

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