GST levies a single standard tax rate for all supplies of goods and services (India is still progressing towards establishing a single speed).
Key Takeaways
- Tax systems: GST (Goods and Services Tax) is a value-added tax applied at each stage of the production process, while SST (Sales and Services Tax) is a single-stage tax imposed at the point of sale or on specific services.
- Transparency: GST is more transparent, with clear tax input and output mechanisms, while SST can result in tax cascading and hidden costs.
- Countries: GST is implemented in countries like India, Australia, and Canada, while SST is used in countries like Malaysia.
GST vs SST
GST and SST differ because GST is a unified and indirect tax levied on the supply of goods and services. SST is a service tax imposed on any taxable service carried out by a taxable individual and a sales tax charged at the manufacturer or consumer levels once only.
Comparison Table
| Parameter of comparison | GST | SST |
|---|---|---|
| Definition | It’s a single consumption-based indirect system of taxation. It is universal throughout the national market. | It’s a sales and service tax levied on locally produced and imported goods and services provided. |
| Tax base | Large tax base with a national market. | Narrow tax base with a local market. |
| Method of taxation | It is levied at multiple stages to increase transparency. | Its imposed only at the output or sales stage. |
| Cascading and compounding effect | Eliminated | Exists |
| Exports | Exports are zero-rated and are eligible to claim input tax. | Due to differential tax rates and cascading effects, there is no complete relief for exports. |
What is GST?
GST is a unified and indirect system of taxation. It is levied on the supply of goods and services like sales of goods, transfer, store, lease, exchange, or disposal of goods and services.
GST is a multi-stage tax system for which input tax credit is available. The input tax credit is highly beneficial for businesses. GST is a consumption-based tax, and its advantages are many.
The GST rate in Canada is 5%, but some states also charge a state GST called the provincial state tax (PST). The PST ranges from between 7% and 10%.
Before the GST, all countries followed SST varyingly. There existed several Central and State taxes. These included Central excise duty, cesses, surcharges, service tax, etc.
What is SST?
The sales tax is imposed on the manufacturing sector, while the service tax is set on the selected services sector. Sales Tax is only imposed once on the manufacturer when sales are made to retail traders.
Sales tax is of various types. A sales tax is imposed on the manufacturer if the buyer is the end consumer. If not, usually, there exist several intermediaries and sales to businesses that later resell the goods and are not charged a tax.
Other types of sales tax include Manufacturers’ sales tax, Wholesale sales tax, Retail sales tax, excise duty, VAT, octroi, etc.
Sales taxes are deemed to be regressive. The rate of sales tax remains the same for all classes of society. It does not change with income levels and hence causes a more significant burden for the poor.
Main Differences Between GST and SST
- GST is more transparent, while SST keeps the consumers in the dark about transfer pricing and vertical integration.
- Evidence shows that sales tax productivity has decreased over the years while that of GST has increased.
- https://search.proquest.com/openview/4e0b80d3407efcacc087ec4ef961e1bb/1?pq-origsite=gscholar&cbl=30282
- https://search.informit.com.au/documentSummary;dn=348442267344926;res=IELAPA
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This article is really enlightening. I never knew the specifics of GST and SST until now. Great read!
Informative indeed. Good job!
I totally agree, Charlotte37. The comparison table particularly caught my attention.
I expected this to be really boring, but it was well written and well organized. I enjoyed learning about the differences.
Honestly, I found it to be a little one-sided. It seemed to lean in favor of GST.
I respectfully disagree, Mbrown. It seemed fair to me.
I see what you’re saying, Mbrown. Could use a bit more objectivity.
I don’t find tax discussions interesting but this was a great read. Nice work!
Agreed, Damien Gray
Well said, Damien Gray!
Reading about GST and SST was more exciting than I anticipated. I appreciate the depth of information here.
Same here, Gavin09. I was thoroughly engaged.
Right? I didn’t expect to be drawn in by tax discussion, but this was great.
I’m not entirely convinced about these differences between GST and SST. It feels like the article is slightly biased towards GST.
Agreed. Both systems have their pros and cons.
I kind of see your point, Hedwards. Could have been more balanced.
Great article. I like how GST and SST are compared systematically. It really helped me to understand the differences between the two.
Absolutely, Ijames! It’s very informative and clear.
This is an excellent approach to understanding the mechanics and implications of both GST and SST systems.
Concise and very well explained. Kudos to the writer.
This article is not only interesting but very informative. Thanks for the comparison!
Right on, Sofia White. This was a great read.