what is the goods and services tax gst 
the goods and services tax gst is a value added tax vat levied on most goods and services sold for domestic consumption the gst is paid by consumers but it is remitted to the government by the businesses selling the goods and services critics point out however that the gst may disproportionately burden people whose self reported income are in the lowest and middle income brackets making it a regressive tax these critics argue that gst can therefore exacerbate income inequality and contribute to social and economic disparities in order to address these concerns some countries have introduced gst exemptions or reduced gst rates on essential goods and services such as food and healthcare others have implemented gst credits or rebates to help offset the impact of gst on lower income households goods and services tax should not be confused with the generation skipping trust also abbreviated gst and its related taxation gstt understanding the goods and services tax gst the goods and services tax gst is an indirect federal sales tax that is applied to the cost of certain goods and services the business adds the gst to the price of the product and a customer who buys the product pays the sales price inclusive of the gst the gst portion is collected by the business or seller and forwarded to the government it is also referred to as value added tax vat in some countries most countries with a gst have a single unified gst system which means that a single tax rate is applied throughout the country a country with a unified gst platform merges central taxes e g sales tax excise duty tax and service tax with state level taxes e g entertainment tax entry tax transfer tax sin tax and luxury tax and collects them as one single tax these countries tax virtually everything at a single rate france was the first country to implement the gst in 1954 since then an estimated 140 countries have adopted this tax system in some form or another some of the countries with a gst include canada vietnam australia singapore united kingdom spain italy nigeria brazil and india dual goods and services tax structuresonly a handful of countries such as canada and brazil have a dual gst structure compared to a unified gst economy where tax is collected by the federal government and then distributed to the states in a dual system the federal gst is applied in addition to a local sales tax in canada for example the federal government levies a 5 tax and some provinces also levy a provincial sales tax pst which varies from 8 to 10 in this case a consumer s receipt will clearly have the gst and pst rate that was applied to their purchase value more recently the gst and pst have been combined in some provinces into a single tax known as the harmonized sales tax hst prince edward island was the first to adopt the hst in 2013 combining its federal and provincial sales taxes into a single tax since then several other provinces have followed suit including new brunswick newfoundland and labrador nova scotia and ontario critiques of the gstgst is generally considered to be a regressive tax meaning that it takes a relatively larger percentage of income from lower income households compared to higher income households this is because gst is levied uniformly on the consumption of goods and services rather than on income or wealth lower income households tend to spend a larger proportion of their income on consumables such as food and household goods which are subject to gst as a result gst can disproportionately burden lower income households because of this some countries with gst have considered possible adjustments that could make the tax more progressive by taking a larger percentage from higher income earners example india s adoption of the gstindia established a dual gst structure in 2017 which was the biggest reform in the country s tax structure in decades the main objective of incorporating the gst was to eliminate tax on tax or double taxation which cascades from the manufacturing level to the consumption level for example a manufacturer that makes notebooks obtains the raw materials for say rs 10 which includes a 10 tax this means that they pay rs 1 in tax for rs 9 worth of materials in the process of manufacturing the notebook the manufacturer adds value to the original materials of rs 5 for a total value of rs 10 rs 5 rs 15 the 10 tax due on the finished good will be rs 1 50 under a gst system the previous tax paid can be applied against this additional tax to bring the effective tax rate to rs 1 50 rs 1 00 rs 0 50 in turn the wholesaler purchases the notebook for rs 15 and sells it to the retailer at a rs 2 50 markup value for rs 17 50 the 10 tax on the gross value of the good will be rs 1 75 which the wholesaler can apply against the tax on the original cost price from the manufacturer i e rs 15 the wholesaler s effective tax rate will thus be rs 1 75 rs 1 50 rs 0 25 similarly if the retailer s margin is rs 1 50 his effective tax rate will be 10 x rs 19 rs 1 75 rs 0 15 total tax that cascades from manufacturer to retailer will be rs 1 rs 0 50 rs 0 25 rs 0 15 rs 1 90 india has since launching the gst on july 1 2017 implemented the following tax rates the previous system with no gst implied that tax was paid on the value of goods and margin at every stage of the production process this would translate to a higher amount of total taxes paid which was then carried down to the end consumer in the form of higher costs for goods and services the implementation of the gst system in india was therefore a measure that was used to reduce inflation in the long run goods and services tax vs generation skipping transfer taxgst should not be confused with the generation skipping transfer tax gstt and they are not at all related to one another the former is a sort of vat tax added to the purchase of goods or serves meanwhile gstt is a flat 40 federal tax on the transfer of inheritances from one s estate to a beneficiary who is at least 37 years younger than the donor the gst tax prevents wealthy individuals from avoiding estate taxes through naming younger beneficiaries such as grandchildren who has to pay gst in general goods and services tax gst is paid by the consumers or buyers of goods or services some products such as from the agricultural or healthcare sectors may be exempt from gst depending on the jurisdiction 