GST vs. VAT Tax: What’s the Difference?

Updated on June 3, 2022

Paying your annual business taxes and thinking about your tax obligations may lead to the term “GST,” which you may not be familiar with. Find out a little more about GST and you’ll discover that it looks a lot like VAT. It’s important to understand the difference between VAT (Value-Added Tax) and GST (GST). We’ll take care of you. This helpful tutorial will teach you all you need to know about the differences between the UK GST tax and the US VAT tax.

What is VAT?

Valuation Added Tax (VAT) When it comes to the purchase price of specific goods and services, a consumption tax is levied. Aside from a few exceptions, the price of most goods and services is affected by taxes such as VAT. Although VAT is a sort of tax, the government does not collect it directly from consumers. Businesses, on the other hand, are responsible for collecting and remitting the tax.

What is GST?

Goods and Services Tax (GST) In countries like Australia, India, Canada, New Zealand, Singapore, and Hong Kong, it is a form of Value Added Tax. To a certain extent, it works like VAT because it levies a consumption tax on the price of products and services. Similarly to VAT, you must register for GST and the penalties for failing to do so can be substantial, so it’s best not to put off registration once you discover that GST applies to your company. Check out our GST (Australian) article for additional information.

GST and VAT difference

Many people confuse the terms “goods and services tax” (GST) with “value-added tax” (VAT). Value Added Tax (VAT) and Goods and Services Tax (GST) are two different terms for the same item. UK-based enterprises may not have to worry about the changes in VAT/GST because it will not be relevant to them. There are several important differences between GST and VAT that you should be aware of if your firm has locations in countries where GST is in effect or if you do a large amount of business with countries where GST is in effect.

Rate of taxation Generally speaking, VAT is more expensive than GST when it comes to taxes. Australia, Singapore, and Canada charge GST at 10%, 7%, and 5% correspondingly, compared to the UK’s 20% VAT.

Items not subject to sales tax — As a side note, some commodities exempt from VAT may not be exempt from GST, and the other way around. Precious metals, such as gold, are GST-free in Australia, however silver, palladium, and platinum are not in the UK.

The registration requirements for VAT and GST are also likely to differ between countries and countries, so it’s important to keep this in mind. It’s mandatory to register for GST if your GST turnover is more than AUD750,000 each year. The VAT threshold, on the other hand, is £85,000.

As you can see, VAT and GST have a lot of distinctions. Outsourcing your tax files to a qualified accountant may be a good choice if you’re dealing with both VAT and GST at the same time due to their complexity.

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