What is the Difference between Sales Tax and VAT?

Sales tax is a type of indirect tax that applies to the sale or disposal of goods and services in a country. It is levied by lawmakers at different levels in order to generate revenue for government expenditures. The rate, number of rates, scope (e.g., physical versus digital products), and exemptions vary from one country to another.

VAT is an abbreviation for value-added tax, which refers to any form of indirect taxation that assesses a levy on final sales values rather than raw materials or finished goods. This includes taxes imposed on the manufacture, export processing, importation into the country or region where it will be consumed, etc.

Sales tax is a type of taxation that applies to the purchase of goods and services at retail. It is calculated as the percentage of the price you pay for an item, and it usually depends on where you are in your country. For example, in India, sales tax ranges from 3-5%.

Vat (value added tax) is similar to sales tax but applies to services as well as goods. It’s also calculated based on how much value was added during production or distribution phases. This can include things like labour costs, material costs, taxes applicable to exports etc., so it can be quite complex and confusing.