There are many different types of indirect taxes. In the US, there is sales tax. Across Europe and in many other countries there is value-added tax (VAT). In Canada and other regions there is the goods and services tax (GST). Each of these taxes have similarities, but there are differences to be aware of if your business is expanding to new countries.

In this article, we’ll focus on the details of the GST, including when you should be collecting it from your customers, how to register to collect GST and what to do when it is time to file and remit.

What's in this article?

• What is the GST?
  
• When am I required to collect GST from customers?
  
• How do I register to collect GST?
  
• How to file and remit GST
  

What is the GST?

The GST is a type of indirect tax levied on goods and services that is commonly found in Canada and the Asia-Pacific region. It’s paid by the customer and remitted to the tax authority by the business. The GST is very similar to VAT. However, VAT tax rates are typically higher than GST rates. For example, the average standard rate of VAT in the EU is 22%, while the rate of GST in Australia, Singapore and Canada is 10%, 8% and 5%, respectively. Some goods that are exempt from VAT may not be exempt from GST and vice versa.

GST rates also vary by country. In Canada, the GST rate is 5%, while in New Zealand, the GST rate is 15%. In some countries with GST, the tax is levied at the federal level, but there are additional regional taxes businesses need to consider. For example, in Canada, businesses need to charge provincial state taxes (PST) in certain provinces in addition to charging GST. However, certain provinces have adopted a harmonised sales tax (HST) that combines GST and PST into one tax.

When am I required to collect GST from customers?

The threshold to collect GST varies by country. For example, in Canada, a remote seller supplying goods and services in Canada must register for federal GST/HST when they make sales in Canada exceeding CA$30,000 within the past four calendar quarters. While in Singapore, remote sellers must register for GST under the Overseas Vendor Registration regime if in a calendar year they (1) have a global turnover exceeding SG$1 million and (2) make B2C supplies of digital services to customers in Singapore exceeding SG$100,000. Global turnover refers to all supplies made that would be taxable supplies if made in Singapore.

To ensure that your business is compliant, check with the specific tax laws in the country where you make sales to understand your tax obligations.

How do I register to collect GST?

In most countries with GST, businesses are required to register with the tax authorities before they begin collecting GST from customers. Businesses can register online on the appropriate tax authority website. Here is more information on how to register to collect GST in Canada, and we have information on how to register in other countries with GST here.

How to file and remit GST

Submitting a GST return is the final step to compliance. If you have not collected GST from customers in a period and have no tax to remit, you may still need to file your return by the due date. Each country has their own return forms and filing frequency. Your due date and how often you file could depend on your annual sales revenue.

Filing frequency varies by country and business revenue, but businesses can usually submit returns and payments online. Failure to file and remit the correct amount of GST can result in interest and penalties.

GST compliance and legal requirements

What are the legal requirements for GST compliance?

To stay compliant with GST regulations, businesses generally must take the following steps:

• Registration: Register for a GST identification number, often when their annual turnover crosses a specific threshold. Foreign businesses, however, may need to register for GST immediately after doing business in a country.
  
• Invoicing: Issue GST invoices that clearly state the GST identification number, the rate charged, and the description of goods or services exchanged.
  
• Recordkeeping: Maintain detailed records of all sales and purchases for a set period for potential audits. Typically, this is around the 5 to 7 year mark.
  
• Timely filing: Submit periodic returns and remit the collected tax to the government by the deadline to avoid hefty penalties. Common filing cadences are monthly or quarterly, depending on jurisdiction and business type.
  

When am I required to collect GST from customers?

The threshold to collect GST varies by country. For example, in Canada, a remote seller supplying goods and services in Canada must register for federal GST/HST when they make sales in Canada exceeding $30,000 CAD within the past 12 months. In Singapore, remote sellers must register for GST under the Overseas Vendor Registration regime if in a calendar year they (1) have a global turnover exceeding SGD 1 million and (2) make B2C supplies of digital services to customers in Singapore exceeding SGD 100,000. Global turnover refers to all supplies made that would be taxable supplies if made in Singapore.

To ensure your business is compliant, check with the specific tax laws in the country where you make sales to understand your tax obligations.

How do I register to collect GST?

In most countries with GST, businesses are required to register with the tax authorities before they begin collecting GST from customers. Businesses can register online on the appropriate tax authority website. Learn how to register to collect GST in Canada and how to register in other countries with GST.

How to file and remit GST

Submitting a GST return is the final step to compliance. If you have not collected GST from customers in a period and have no tax to remit, you may still need to file your return by the due date. Each country has their own return forms and filing frequency. Your due date and how often you file could depend on your annual sales revenue.

Filing frequency varies by country and business revenue, but businesses can usually submit returns and payments online. Failure to file and remit the correct amount of GST can result in interest and penalties.

Stripe Tax can make filing and remittance easier. With our trusted global partners, users benefit from a seamless experience that connects to your Stripe transaction data—letting our partners manage your filings so you can focus on growing your business.

What are the consequences of noncompliance with GST regulations?

Negative consequences for GST noncompliance include:

• Late filing fees: Many jurisdictions with GST regulations charge a daily fee from the time that a filing deadline is missed. Fees can range from $50 to $200 a day.
  
• Interest charges: If you owe GST tax and do not remit it by the deadline, the balance can be subject to interest. The exact interest rate ranges from around 8% in Canada to 18% annually in India, compounded daily.
  
• Operational disruptions: In many regions with GST, the tax authority will block frequent nonfilers from filing future returns, creating a backlog that can cause a business to grind to a halt.
  
• Registration suspension: Failure to file GST returns for an extended period of time can lead to the suspension of GST registration, which makes it illegal to move goods or services.
  
• Audit risks: Noncompliance can flag a business as a potential risk, making a full audit more likely.
  
• Searches and asset seizures: Noncompliant businesses are subject to searches by the authorities. Many jurisdictions can also seize goods and vehicles or freeze bank accounts to recover unpaid taxes.
  
• Reputational risks: GST noncompliance can lead to a loss of credibility with customers, suppliers, and banks, making it more difficult to operate.
  

Goods and service tax FAQs

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Stripe Tax helps you monitor your obligations and alerts you when you exceed a GST registration threshold based on your Stripe transactions. In addition, it automatically calculates and collects sales tax, VAT, and GST on both physical and digital goods and services—in all US states and in more than 100 countries.

Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful API.

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration, or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: Let Stripe manage your global tax registrations, and benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business.

Learn more about Stripe Tax, or get started today.