CST vs VAT: Key Differences Every Indian Business Must Know
CST is Central Sales Tax, a 2% levy on interstate sales that was replaced by IGST on 1 July 2017. VAT is Value Added Tax, a state-level tax still charged on intra-state sales at rates between 5–28%.
Entrepreneurs still Google “CST vs VAT” because old invoices, accounting books and WhatsApp group forwards keep the acronym alive. The mix-up feels harmless until a GST audit flags the wrong tax line.
Key Differences
CST applied only when goods crossed state borders and allowed no input credit. VAT applies inside a state, gives full credit on inputs, and must be deposited monthly via the state VAT portal.
Which One Should You Choose?
You don’t choose; the transaction chooses. Interstate? IGST replaces CST. Intrastate? VAT plus SGST applies. Check the “Place of Supply” line on your invoice and tag the correct tax code in Tally or Zoho Books.
Is CST still legal after GST?
No. IGST subsumed CST; any lingering CST entries are legacy data.
Can I claim VAT credit on exports?
Exports are zero-rated; VAT paid on inputs is refunded via the state’s VAT refund form.