Goods and Sales Tax (GST) / Value-Added Tax (VAT)

Goods and Sales Tax (GST) / Value-Added Tax (VAT) – Goods and Services Tax (GST) is a value-added tax (VAT) levied on the supply of most goods and services for domestic consumption. It is a multi-stage tax system, meaning tax is collected at every stage of the production and distribution process, from manufacturing to retail. Under GST, businesses can claim input tax credit, allowing them to offset the tax already paid on inputs against the tax payable on the value added at subsequent stages. This mechanism ensures that tax is effectively levied only on the value addition, reducing the cascading effect of taxes seen under earlier sales tax systems.

Example: A manufacturer produces goods costing ₹1,000 and pays ₹100 as GST on raw materials. If the goods are sold to a retailer at ₹1,500 with GST of ₹150, the manufacturer can claim input credit of ₹100, paying only ₹50 to the government