What Is A GST And Which Countries Have It?

February 18, 2021

GST, or Goods and Services Tax, is a type of indirect tax that is aimed at consumption. Many similar consumption taxes around the world are roughly based on the same principles. In some EU Member States, Argentina, Mexico, and many others, this tax type is called a Value-Added Tax (VAT).


Who Pays Goods And Services Tax (GST), And How Is It Charged?

Everyone who purchases any good and service pays GST. Since it is a type of indirect tax, that means it is not paid by the customers directly to governments - it is paid by the customers at the point of sale and passed to the governments by the seller.

It is mostly built into the final price of many daily consumed items such as food, clothing, petrol, and transportation services. 

Opposite to the value-added tax in which a few different rates are applicable, like general, reduced, or super-reduced VAT rate), the GST is usually taxed at a single rate. 


Which Countries Collect The Goods And Services Tax (GST)?

The first country that introduced Goods and Services Tax as a type of indirect tax levied on consumption was France in 1954. Since then, around 160 countries followed that example and implemented some kind of indirect tax - GST or VAT.

Like all other EU Member States, France adopted a VAT system instead of the GST.  

Some countries that are still under the GST system are India, Canada, Australia, New Zealand, and Singapore.


Who Is Obliged To Register For GST?

Since this is a type of indirect tax, main taxation principles work in the same way as in the case of Value-added tax (VAT). That means that in many countries where GST is adopted, registration is not required unless the business's turnover exceeds a specific annual threshold.

For example, the registration thresholds in 2021. are the following:

  • Canada - CAD 30,000
  • Australia - AUD 75,000
  • New Zealand - NZD 60,000
  • Singapore - SGD 1,000,000

If the turnover exceeds a threshold, that business will automatically enter the GST system. However, if it doesn't exceed a threshold, a business can anyway register for GST voluntarily.


How To Calculate GST?

To facilitate the efforts needed to calculate a GST, Fonoa developed Fonoa Tax. The Fonoa Tax engine automatically determines the correct tax treatment for sales transactions anywhere in the world. After you provide minimal transaction data input, the tax engine will determine if the transaction is taxable, what tax rate applies, and the tax amount you need to charge for that transaction - taking into account whether the seller exceeded the relevant GST threshold in the buyers country, and what is the product / service being transacted.