Goods and Services Tax (GST) is a value-added tax levied on the sale of goods and services at each stage of production and distribution. It is a consumption tax borne by the end consumer.
Here are some key features of GST:
Multi-stage Tax: GST is applied at each stage of the supply chain, from the production or importation of goods to the final sale to the consumer. At each stage, the tax is levied on the value added by the business or individual involved in the transaction.
Input Tax Credit: Businesses registered for GST can typically claim a credit for the GST they pay on their inputs (i.e., purchases of goods and services used in their business). This input tax credit mechanism prevents double taxation and ensures that the end consumer bears GST.
Value-Added Taxation: GST is a type of value-added tax (VAT) because it is levied on the value added to goods and services at each stage of production and distribution. This contrasts with a sales tax, which is applied only at the final sale to the consumer.
Taxable Supplies: GST typically applies to a wide range of goods and services, but certain supplies may be exempt or zero-rated, depending on the jurisdiction. Exempt supplies are not subject to GST, while zero-rated supplies are taxed at a rate of 0%.
Registration Threshold: Businesses are generally required to register for GST if their annual turnover exceeds a certain threshold set by the government. Below this threshold, businesses may have the option to register voluntarily for GST.
Tax Rates: The GST rate can vary depending on the country and the type of goods and services involved. GST rates are usually set as a percentage of the transaction value, and different rates may apply to different categories of goods and services.
Compliance and Administration: Businesses registered for GST are responsible for collecting GST from their customers, filing periodic GST returns with the tax authorities, and remitting the GST collected. Tax authorities oversee compliance with GST regulations and may conduct audits to ensure the accuracy and completeness of GST reporting.