Difference Between GST and SST

GST levies a single standard tax rate for all supply of goods and services (India is still progressing towards establishing a single rate).

GST vs SST

The main difference between GST and SST is that GST is a unified and indirect tax that is levied on the supply of goods and services. SST is a service tax levied on any taxable service carried out by a taxable individual and a sales tax levied either at the manufacturer level or consumer level, once only.

GST vs SST 2

 

Comparison Table Between GST and SST (in Tabular Form)

Parameter of comparisonGSTSST
DefinitionIt’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 baseLarge tax base with a national market.Narrow tax base with a local market.
Method of taxationIt is levied at multiple stages to increase transparency.Its imposed only at the output or sales stage.
Cascading and compounding effectEliminatedExists
ExportsExports 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, supply, 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.

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.

gst
 

What is SST?

The sales tax is imposed on the manufacturing sector while the service tax is imposed 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 middlemen and sales to businesses that later resell the goods 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 usually deemed to be regressive. The rate of sales tax remains same for all classes of the society. It does not change with income levels and hence causes greater burden for the poor.

sst

Main Differences Between GST and SST

  1. GST is more transparent while SST keeps the consumers in dark about transfer pricing and vertical integration.
  2. Evidence shows that sales tax productivity has decreased over the years while that of GST has increased.

 

Conclusion

More than 160 countries around the world have implemented GST to overcome the drawbacks of SST. However, Malaysia has recently opted to go back to SST regime. Thus the present day necessity is to balance the disadvantages of GST and SST so as to reduce burden on consumers.


References

  1. https://search.proquest.com/openview/4e0b80d3407efcacc087ec4ef961e1bb/1?pq-origsite=gscholar&cbl=30282
  2. https://search.informit.com.au/documentSummary;dn=348442267344926;res=IELAPA
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