Country-specific Tax

• One of the main differences between GST and VAT systems is that they are applied on a country-dependent basis. According to the Organization for Economic Cooperation and Development's Center for Tax Policy and Administration, the number of countries now using a VAT or GST system has risen since the 1960s to 136. An example of a country that uses a VAT system is the UK and examples of countries that work with the GST system are Singapore and Australia.
  
  

VAT in Detail

• VAT is a tax levied on the difference between a commodity's price before taxes and is based on factors like cost of production. In simple terms, VAT is added when a product exchanges hands. It is levied on the value added that results from the exchange, as described by Winston Cockburn and colleagues at North Carolina State University. It is different than a sales tax because sales taxes are levied on the total value of the exchange. VAT is therefore neutral in terms of how many exchanges occur for a given product before it reaches the "end user," or consumer.
  
  

GST in Detail

• GST is added to both products and services, which makes it different from VAT. When a business operating in a GST country buys goods or services it pays an amount of tax to the supplier of those items. This is called the "input tax." When the same business sells goods or services to its own individual or business customers, it has to charge tax. This is the "output tax." Deducting input from output taxes gives the GST value that the business must pay to the government.
  
  

Tax System Act 1999

• One of the differences between VAT and GST is that GST falls into the New Tax System Act of 1999. Because of the different methods of claiming VAT or GST, a double taxation can occur in which a seller of a given product is taxed as they purchase that product and as they exchange it later. To avoid this, some exports are not subject to VAT and if a charge does occur, it is refundable.