A beginner’s guide to Goods and Services Tax (GST)

GST (Goods and Services Tax), a consumption tax similar to VAT, applies to goods and services in countries like Australia, India, Canada, New Zealand, Singapore, and Hong Kong. 

We’ve gathered all you need to know about GST and when to register in Canada, Australia, and New Zealand. Let’s dive in!

What is GST? 

GST, which stands for goods and services tax, is a consumption tax levied on goods and services. Consumers pay the GST, but businesses selling the goods and services remit it to the government. It’s an indirect federal sales tax applied to certain goods and services.  

Businesses add the GST to the product price, and customers pay the inclusive sales price. The collected GST portion is then forwarded to the government. In most countries with GST, a single unified system applies a consistent tax rate nationwide. 

Is it different than VAT?

Value Added Tax (VAT) and Goods and Services Tax (GST) are essentially synonymous terms, both aiming to collect revenue from the final consumers of goods and services. While they might have different names in various countries, their practical implications are nearly identical. 

Therefore, there’s no need for you to spend time wondering about the difference between VAT and GST. Businesses can navigate both tax systems with ease, ensuring compliance and seamless cross-border transactions.

Where is GST applicable?

The application of GST and VAT varies depending on the country. In the EU countries and the UK, the term commonly used is VAT (Value Added Tax).

On the other hand, countries like Australia, India, Canada, New Zealand, Singapore, and Hong Kong opt for the term GST (Goods and Services Tax). 

Do I have to register for GST?

Whether you need to register for GST depends on the rules of your country. Each country has its own criteria, like a specific turnover amount or certain goods and services that require GST registration. 

Remember, each country may have different rules and procedures for GST, even though they use the same system. Let’s take a look at three countries that use GST: Canada, Australia, and New Zealand. 

GST in Canada

If your business makes more than CAD$30,000 in taxable supplies, you need to register for GST. If your earnings are below this amount, you’re considered a small enterprise and not required to register. This applies to both resident and non-resident businesses. If you do need to register, don’t forget to submit your application to the Canada Revenue Agency within 30 days after your first taxable supply.  

The Federal GST rate is set at a standard of 5%. Some provinces add a Provincial Sales Tax, which combines with the GST to form HST. HST rates are usually 15%, but in Ontario, it’s 13%. HST covers the same goods and services as GST. You can find the list of Canada’s GST/HST rates here.

GST in Australia

Businesses must register for GST once their turnover reaches AU$75,000. If you expect to surpass this threshold, you should register within 21 days of becoming aware of it. Non-resident entities also need to register if they supply goods or services connected to Australia, and the same AU$75,000 threshold applies to them. You can find all the GST registration steps for Australia here. 

The current standard GST rate in Australia is 10%. It applies to most goods and services, with a few exceptions. Certain suppliers can be GST-free for specific items like certain types of food, medical services, childcare, or international mail. You can find the list of Australia’s GST exemptions here. 

GST in New Zealand

If your business sells taxable goods or services and earns over NZ$60,000 in a year, you must register for GST. It’s also mandatory if you charge GST for the goods or services you sell. However, if your turnover is below NZ$60,000, you can choose to register voluntarily. These rules apply to both residents and non-residents doing taxable activities. You can find all the steps for GST registration in New Zealand here.  

The current standard GST rate is 15%. This rate is applied to most goods and services sold within the country, including imports. However, there are some goods and services that are zero-rated or exempted from GST. You can find the list of New Zealand’s zero-rated goods here. 

Key takeaways

Whether it’s GST or VAT, being aware of the sales tax rules, registration steps, thresholds, and rates is crucial. Many countries use these taxes, but each one has its own unique rules to follow for smooth operations.