{"id":150,"date":"2020-01-31T04:42:54","date_gmt":"2020-01-30T23:12:54","guid":{"rendered":""},"modified":"2026-09-03T16:47:23","modified_gmt":"2026-09-03T16:47:23","slug":"gst-removes-double-tax-effect","status":"publish","type":"post","link":"https:\/\/www.legalsalaah.com\/blog\/gst-removes-double-tax-effect\/","title":{"rendered":"GST removes Double tax effect"},"content":{"rendered":"<p><font size=\"4\" face=\"Georgia\" color=\"#330033\">In the previous regime of tax system, the chain of input tax credit, at a particular point, is broken. Let\u2019s say Central sales tax (CST) applicable on interstate trade is non-creditable, resulting in an opportunity in the input credit chain. Similarly, a manufacturer charging excise duty on sale to a dealer causes the chain to interrupt. This ends up in taxes forming a part of the merchandise price.<\/font><\/p>\n<div><font size=\"4\" face=\"Georgia\" color=\"#330033\"><br \/><\/font><\/div>\n<div>\n<div><font size=\"4\" face=\"Georgia\" color=\"#330033\"><b><u>Vat Introduces to eliminate cascading effect?<\/u><\/b><\/font><\/div>\n<div><font size=\"4\" face=\"Georgia\" color=\"#330033\"><br \/><\/font><\/div>\n<div><font size=\"4\" face=\"Georgia\" color=\"#330033\">In the year 2005, VAT was introduced with the similar objective to beat cascading effect (tax on tax). If VAT was designed to eliminate it, however is it completely different in GST?<\/font><\/div>\n<\/div>\n<div><font size=\"4\" face=\"Georgia\" color=\"#330033\"><br \/><\/font><\/div>\n<div><font size=\"4\" face=\"Georgia\" color=\"#330033\"><b>Yes<\/b>, VAT eliminated the cascading tax impact on the state tax, whereas the cascading impact of other indirect taxes still remained. GST permits for seamless flow of reduction, and eliminates the cascading impact of all indirect taxes within the offer chain from manufacturers to retailers, and across state borders.<br \/><\/font><\/div>\n<div><font size=\"4\" face=\"Georgia\" color=\"#330033\"><br \/><\/font><\/div>\n<div><font size=\"4\" face=\"Georgia\" color=\"#330033\"><span id=\"docs-internal-guid-924077b7-7fff-22ee-b820-b455cf506dee\"><span style=\"font-weight: 700; font-variant-numeric: normal; font-variant-east-asian: normal; vertical-align: baseline; white-space: pre-wrap;\">For example:-<\/span><\/span><br \/><\/font><\/div>\n<div><span><span style=\"font-weight: 700; font-variant-numeric: normal; font-variant-east-asian: normal; vertical-align: baseline; white-space: pre-wrap;\"><font size=\"4\" face=\"Georgia\" color=\"#330033\"><br \/><\/font><\/span><\/span><\/div>\n<div><span><span style=\"font-variant-numeric: normal; font-variant-east-asian: normal; vertical-align: baseline;\"><\/p>\n<div style=\"white-space: pre-wrap;\"><font size=\"4\" face=\"Georgia\" color=\"#330033\">1- A government implies a 2% tax on all goods produced and distributed.\u00a0<\/font><\/div>\n<div style=\"white-space: pre-wrap;\"><font size=\"4\" face=\"Georgia\" color=\"#330033\"><br \/><\/font><\/div>\n<div style=\"white-space: pre-wrap;\"><font size=\"4\" face=\"Georgia\" color=\"#330033\">2- A company sells Rs.1,000 worth of stone for a tax-included cost of Rs.1,020 (Rs.1000 + 2% cascade tax) to an artist.\u00a0<\/font><\/div>\n<div style=\"white-space: pre-wrap;\"><font size=\"4\" face=\"Georgia\" color=\"#330033\"><br \/><\/font><\/div>\n<div style=\"white-space: pre-wrap;\"><font size=\"4\" face=\"Georgia\" color=\"#330033\">3- The artist makes a sculpture out of the stone and intends to make Rs.2,000 when he sells it to an art dealer, so he adds this amount to what he paid for the stone to get Rs.3,020, and then adds on the cascade tax which brings the total to Rs.3,080 (Rs.3020 + 2% tax)\u00a0<\/font><\/div>\n<div style=\"white-space: pre-wrap;\"><font size=\"4\" face=\"Georgia\" color=\"#330033\"><br \/><\/font><\/div>\n<div style=\"\"><font size=\"4\" face=\"Georgia\" color=\"#330033\"><span style=\"white-space: pre-wrap;\">4- The art dealer intends to make Rs.5,000 from the sculpture and he adds the amount bringing it to Rs.3,080 for a pre-tax Rs.8,080, He then adds the 2% cascade tax for a total price of Rs.8,242.<\/p>\n<p>5- In total, the government collected taxes of Rs.20 + Rs.60 + Rs.162 = Rs.242, which is actually an effective tax rate of Rs.242\/Rs.8,000 = 3.025%.<\/span><br \/><\/font><\/div>\n<div style=\"\"><span style=\"white-space: pre-wrap;\"><font size=\"4\" face=\"Georgia\" color=\"#330033\"><br \/><\/font><\/span><\/div>\n<div style=\"\"><font color=\"#330033\"><span style=\"white-space: pre-wrap;\"><font size=\"4\" face=\"Georgia\"><b>Conclusion<br \/>\n<\/b><br \/>\nSimply, we said taxpayers need to obtain <b><a href=\"https:\/\/www.legalsalaah.com\/gst-registration-online.html\">GST Registration Online<\/a> <\/b>to easily eliminate the cascading effect.<\/font><\/span><br \/><\/font><\/div>\n<div style=\"\"><span style=\"white-space: pre-wrap;\"><font size=\"4\" face=\"Georgia\" color=\"#330033\"><br \/><\/font><\/span><\/div>\n<div style=\"\"><span style=\"white-space: pre-wrap;\"><font size=\"4\" face=\"Georgia\"><br \/><\/font><\/span><\/div>\n<p><\/span><\/span><\/div>\n","protected":false},"excerpt":{"rendered":"<p>GST removes Double tax effect which is also known as cascading effect. <\/p>\n","protected":false},"author":1,"featured_media":353,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-150","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-gst"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.3 - 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