What is GST Tax?

GST tax is a crucial one implemented in several parts of the globe today and is considered more of a fair taxation policy. Usually, when you are paying for domestic goods and services, the amount deducted from your hand will be including this tax since it is levied on all of them. So who will pay GST? You will pay the tax amount but then forwarded it to the government. 

What is GST tax in the US?

The GST represents goods and services tax (GST) as an indirect federal sales tax applied to the cost of certain goods and services such as streaming video, e-books, online music, etc. Each US state can define tax, and it is usually from 3% to 7%.

Every business tends to add the GST every time they sell the product; they add it in advance itself. To simplify, the sales price always involves GST, and you can find it defined under the bill. Some countries also refer to it as ‘Value-Added Tax,’ a.k.a, VAT. There’s a lot more to this article, how it works, its structure, where all it’s implemented, etc.

How does the Goods & Services Tax work?

Usually, when countries impose it on their financial functioning, it is a bigger functioning. Therefore everyone tends to implement it in a unified manner, meaning the particular formant is implied across every country. All service taxes, including services tax, sales tax, and excise duty tax, are merged with the state taxes such as luxury tax, entertainment tax, etc. The percentage in which these taxes are collected is also unified in the country. 

What are the structures of the Goods & Services Tax?

Not many countries have dual tax structures, and you’ll mostly only find it in Brazil and Canada. Unlike the unified manner where the tax is distributed across the states once collected by the federal government, the GST is applied after applying state taxes in the case of dual structures. Take the example of Canada, the state government has a provincial tax ranging between 7-10%, and the federal government implies an additional 5% to it.

When consumers receive a bill for the products and services they purchased, they find the PST and GST charges listed below. But now, because there is a lot of taxation involved, several parts of the country have started adapting Harmonized Sales Tax, a.k.a, HST. For example, after Prince Edward Island first adopted it, Ontario, Nova Scotia, New Brunswick, Newfoundland, and Labrador have also started applying it. 

Which countries have applied GST as their primary tax collection method?

GST is not a concept of the 21st century but is dated as old as 1954 when France first decided to have this tax form. After them, more than 160 countries have adapted GST for their tax collections to be simplified. Several examples include the United Kingdom, Vietnam, Nigeria, South Korea, Brazil, Italy, Monaco, Spain, Singapore, Vietnam, Australia, India, etc. 

How has India adapted the Goods & Service Tax after scraping of VAT?

It would be fair to say that the step India took wasn’t just any tax implementation, but a massive reform to which people took their time to go through it. As a wide country, they adapted the dual structure, and the whole purpose behind it was to eliminate double taxation. The problem was that the previous taxation policy included varied taxes from manufacturing to finally when the consumer bought it, so GST was brought in. 

Say, for instance, as a manufacturer who produces pens, you source your raw materials at Rs. 5, including the tax. 0.50 paise would be the tax, and the goods would be costing Rs. 4.50. After that, you decided to add a value of Rs. 2.5, therefore Rs. 5 + Rs. 2.5=Rs. 7.5. After that, as 10% tax is due on the final good, it would be 0.75 paise. When you work by the GST system, the tax you had paid previously can be put up against the tax needed to pay additionally, making it go 0.75 – 0.50 = 0.25. 

As the wholesaler is set to purchase the good from you at Rs. 7.5, and adds his own value of Rs. 2.5, then the tax he’d have to pay on the gross value would be Re. 1 (10% tax). So it keeps on passing ahead, and the tax value is the same for everyone under this tax format. 

Concluding: What factors did India ensure to involve as they launched GST? 

The country first implemented this tax on July 1, 2017, and they made sure to have: 

  • 0.25% of tax will be applied on semi-polished stones.
  • 5% tax is present for household requirements such as tea, coffee, spices, and sugar. 
  • 12% tax is imposed on processed foods and computers. 
  • 18% is applied to toothpaste, hair oil, soap, and industrial intercessors.
  • 28% is imposed on luxury products such as electronics, motorcycles, and cars.

There is a ZERO percent tax on certain foods, newspapers, hotel services, homespun cotton cloth, and books. When the country functioned according to VAT or RST/CST, taxes were applicable on every stage before the product was finally in the consumer’s hands. The added taxes rose the price to a higher stage, and it was all borne by the consumer ahead. The Goods & Services Tax has simplified the procedure a lot, eliminating inflation. Surely, people were reluctant and thought, “Who will pay the GST?” but that’s not just the case anymore!



Igor has been a trader since 2007. Currently, Igor works for several prop trading companies. He is an expert in financial niche, long-term trading, and weekly technical levels. The primary field of Igor's research is the application of machine learning in algorithmic trading. Education: Computer Engineering and Ph.D. in machine learning. Igor regularly publishes trading-related videos on the Fxigor Youtube channel. To contact Igor write on: igor@forex.in.rs

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