Goods and Services Tax
A broad-based consumption tax applied to most goods and services, similar to VAT, used in Canada, Australia, India, Singapore, and other countries.
FAQs
What is the difference between GST and VAT?
GST and VAT are functionally identical — both are multi-stage consumption taxes with input tax credits, placing the ultimate burden on end consumers. The terminology differs by country. Countries like Canada, Australia, and India use 'GST'; EU countries use 'VAT.' Some countries use both terms for different parts of a combined tax system.
Do US companies selling software to Australian businesses owe Australian GST?
Yes. Australia requires offshore suppliers of digital products and services (including SaaS, online software, streaming) to register for GST and collect it on sales to Australian consumers exceeding AUD $75,000 annually. For B2B sales, Australian businesses account for GST through the reverse charge mechanism.
What is Input Tax Credit (ITC) in a GST system?
Input Tax Credit allows a registered business to deduct the GST it has paid on business purchases (inputs) from the GST it collects on sales (outputs), remitting only the net difference to the government. This prevents 'cascading' taxation where tax is levied on tax, ensuring the effective rate equals the GST rate only at the final consumer level.
Related Terms
Value Added Tax
A consumption tax levied at each stage of production and distribution, collected by businesses on behalf of the government throughout the supply chain.
Sales Tax Nexus
The level of connection between a business and a state sufficient to require the business to collect and remit sales tax in that state.
Economic Nexus
A sales tax obligation trigger based on the dollar value or number of transactions in a state, regardless of physical presence, established after South Dakota v. Wayfair (2018).