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[Infograph] Everything That You Need To Know About VAT, CST and Service Taxations

By Tanz on 10 Comments / 3522 views

Once you have started selling online, you come across various terms in relation to taxation like VAT, CST and Service Tax. The main concern is not being from a commerce background, the biggest headache becomes understanding what they mean, how they are charged and what are the exemptions in these. Turning a blind eye to these can lead to penalties and issues related to shipping of products.

Therefore we thought of coming up with an infograph that will make this entire topic very easy for you to understand.

This infograph covers the basic definitions, when to get registered, rates of VAT, CST and Service Taxation

Now that you  have gained the basic knowledge for the above, we would also like to add various lists that are important for you to know.

Exemptions In Various Taxation

There are few exceptions in the list of goods that are levied with taxes which are mentioned as follows

Exemptions in VAT

There are various products that have been exempted from VAT whose list is as follows

Items that are exempted from VAT

If you want to know more about how VAT registration is done, you can go forward and rake this resource- VAT Registration Simplified

Exemptions in CST

The various situations in which CST is exempted are as follows

  1. On installation.(if shown separately in invoice.)

  2. Commissioning (if shown separately in invoice.)

  3. Goods rejected.

  4. Trade and cash discounts are excluded for purpose of calculating CST.

  5. If goods are returned within 6 months. This time limit does not apply to rejection of goods since in that case there is no ‘sale’

  6. On outward freight (if charged separately) and outward insurance if property in goods passes to buyer at the time of dispatch.

For reference of what Declared Goods are, you can refer this resource – List of Declared Goods

Exemptions In Service Tax

Items in the Negative list of Service Tax

This blog has majorly covered everything that you as an entrepreneur should know about taxations. Hope it solved your queries and if you are still left with a few, you can always put a comment and let us know and we’d help you out.

P.S: This post was originally written by Divya Sharma Dixit for the Zepo Blog: the E-commerce Blog for Small and Medium Enterprises.

 

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10 Comments

  1. very very nice!!!

  2. Thanks for the valuable piece of information!

    Though i still have 1 question about it… Does Gift Vouchers/Gift cards [which works as currency] fall in the definition of money & thus, is it exempted from Service tax?

  3. Very nice information. Thanks for sharing

  4. Thanks for this infographic, very much required info. Although basic, I was looking for something like this. I run a small local ecommerce portal called Ahmedabadgiftshop.com and also run digital marketing agency under the same firm. Now, we want to sell few of the gift products on market places likeamazon,flipkart andsnapdeal; and to sell on these websites, we need to have VAT and CST number. What would you suggest in our case? How can we separate the products and service business from each other under the same name? Thanks for your help. 

  5. Hi Dhruti

    There are certain gift cards that fall under the IRS code for tax exempt treatment. As long as the gift card can not be used for cash, paying bills, etc., and are part of a defined benefit plan for gift selections, such as, an award program, they are non-taxable. The code states: according to Prop Regs 1.274-8, the exemption for employee acheivement award applied to “tangible personal property” that is transferred to an employee by reason of the employee’s length of service of safety achievement. Also, the exemption is limited to $400 or $1600 depending on the qualification of the award plan.

    “Tangible personal property” does not include cash or a certificate (other than a nonnegotiable certificate conferring only the right to receive tangible personal property). If the certificate entitles an employee to receive a reduction of the balance due on his account with the issuer of the certificate, the certificate is a negotiable certificate and is not tangible personal property for purposes of this section. Other items that will not be considered to be items of tangible personal property include vacations, meals, lodging, tickets to theater or sporting events, and stocks, bonds, and other securities.

  6. You are welcome 🙂

  7. Hi Kaushal

    If your digital marketing agency has the same name and runs on the same website as Ahmedabadgiftshop.com then you can have a single VAT/CST number. Also for the services that you provide, you’ll have to register for Service tax.

    For tangible goods- VAT/CST are good to go

    For Services (Intangible goods)- Service Tax is required.

    Hope this helps

  8. Hi Tanz,

    We are selling fruits,vegetables and grocery.Can you clarify, in case of Service Tax, “Annual Sales Turnover exceeds 9 Lakhs, service tax to be paid on amount exceeding 10 Lakhs”?

    ~Sunil Suri

  9. Hi Sunil

    If you are selling goods like fruits, vegetables and grocery, then these are all tangible goods and are exempted from VAT.

    While we say annual sales turnover exceeds 9 lakhs, it means whenever your turnover exceeds 9Lakh , you should register for Service tax and start paying it only when your turnover exceeds 10 Lakh. 

    Hope this helps

  10. Thank you Alok 🙂

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