GST vs VAT

GST and VAT are terms used almost interchangeably by many businesses. In many ways these terms refer to the same type of tax.

Countries do not usually have both GST and VAT regimes. An exception however is India, where VAT can be charged on alcohol sold in eateries while GST is charges on everything else.

What is GST?

GST refers to Goods and Services Tax. This is a tax that is levied in countries like Canada, Singapore and Hong Kong. This is in fact a form of value added tax.

What is VAT?

VAT refers to Value Added Tax. This is a tax that is levied on the purchase or import of goods. In some countries there is a separate component for services. VAT is charges in countries like Thailand and Sweden.

What are the similarities between GST & VAT?

Corporations need to be registered with the tax authorities in order to charge GST or VAT when certain conditions are met. It can be a serious offence not to do so when required. Both these taxes are indirect taxes. This means that the tax authorities do not collect these taxes from the end customers, but instead they collect these taxes from the businesses. The businesses hence will charge GST/VAT on consumers during transactions. The only case where the authorities directly collect GST or VAT from end consumers would be in the case where the tax is collected on imports.

GST/VAT regimes between countries are not necessarily the same in their administration, implementation or rules. 

Differences between countries can lie in the following:

  1. When GST/VAT can be charged by businesses
  2. When GST/VAT must be charged by businesses
  3. When GST/VAT can be zero-rated
  4. When GST/VST can be refunded
  5. Tax exemption threshold
  6. Goods and services exempted
  7. Registration requirements
  8. Payment modes accepted
  9. Filing deadlines
  10. When input tax credit benefit is available
  11. Complexity of administration (i.e India, iGST can be said to have replaced VAT.)

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