Goods and services tax (GST) is the tax rendered on goods and services in many countries. It’s a value-added tax (VAT), meaning it’s applied at each stage of the supply chain, it’s included in the final total cost, and it is ultimately paid by the end customer. Countries such as Australia, Canada, India, New Zealand, and Singapore have GST, although rates and rules vary by jurisdiction. Singapore, for example, collected 20 billion Singapore dollars (SGD) in GST during the 2024–2025 fiscal year.

Businesses collect and remit GST to the government, but it’s not actually a cost they incur. Companies need pricing strategies that stay attractive to customers while covering GST, plus solid recordkeeping systems—often aided by software—to track transactions and calculate what's owed. GST's applicability can also vary by product, service, and location, with some goods exempt and others taxed differently.

Managing GST effectively is a key part of a business’s operations, and demands attention to detail, up-to-date knowledge of tax laws, and reliable and consistent systems for tax collection and recordkeeping. Below is a guide to what businesses should know about GST, including how to calculate it and how Stripe can help simplify GST management.

What’s in this article?

• GST vs. other forms of taxation for businesses
  
• GST and the business activity statement (BAS) in Australia
  
• How to calculate GST for your business
  
• How Stripe Tax can help
  

GST vs. other forms of taxation for businesses

GST stands out from other types of taxes for several reasons. Here’s how it’s different:

Nature of taxation

• Value-added approach: Unlike a traditional sales tax imposed at the point of sale, GST is applied at every stage of the production and distribution process. This means that at each step where value is added, GST is charged. This credit mechanism also helps prevent the cascading effect of taxes (a tax on a tax), which is a common issue in non–value-added tax systems.

• Input tax credits: Businesses can claim credits for the GST paid on their inputs, which ensures that the ultimate burden of the tax falls on the end customer. This feature distinguishes GST from a cumulative tax system where the tax is levied on the total value, including taxes at previous stages.

Scope

• Broad-based tax: GST typically encompasses a wide range of goods and services, making it a comprehensive form of taxation. This broad coverage contrasts with specific excise taxes or luxury taxes that target specific goods or services. However, many GST systems carve out certain exemptions either to ease the tax burden on necessities or because they're difficult to value-add in the usual way. Exemptions are common for essentials such as basic food staples, healthcare, education, and financial services.

• Uniformity across products and services: While there are exceptions and varying rates in some cases, GST generally provides uniform tax treatment for different goods and services. This differs from other tax systems, in which rates and rules vary for different categories.

Business impact

• Recordkeeping and compliance: The multistage nature of GST means businesses must pay careful attention to recordkeeping and reporting. This is more complex than single-point taxes and requires robust accounting systems. The structure also encourages compliance, since businesses must report sales and inputs to claim tax credits, creating a self-regulating system.

• Price structuring and strategy: GST impacts the prices customers pay, and businesses must take this into account when setting prices.

Understanding how GST compares to other tax forms will lead to smarter decisions and more informed compliance strategies.

GST and the business activity statement (BAS) in Australia

Australian businesses should be aware of the business activity statement (BAS), a form Australian companies submit to the Australian Tax Office to report their tax obligations, including GST. Within this form, businesses detail sales, purchases, and the resulting GST they need to pay or are due to receive back. It serves as a regular update for tax authorities, keeping a business’s records up-to-date.

When a company sells a product or service, it adds GST to the sale price. This extra amount is not for the business to keep; the business is holding it on behalf of the tax office. Conversely, when a business buys products or services, it pays GST. However, if the business is registered, it can typically claim credits for the GST included in the price of purchases for the business.

Each reporting period, businesses tally up GST on sales (output tax) and GST on purchases (input tax). The BAS is where they report the difference between these two amounts. If the GST collected on sales exceeds the GST paid on purchases, the business owes money to the government. If it’s the other way around, the business can claim a refund.

For companies, staying on top of GST and BAS obligations is key. It keeps them compliant with tax laws, and it also provides a clear view of their taxable activities, which is necessary for informed decision-making and financial planning. By including GST in regular BAS reporting, businesses can manage ongoing tax responsibilities without the need for sudden adjustments or corrections.

How to calculate GST for your business

The core formula for calculating the GST your business owes is:

GST amount = Price x (GST rate / 100)

Two related formulas are also useful, depending on what you're working with:

• GST-inclusive price: total price = original price x (1 + GST rate / 100)

• Reverse-calculate the pre-GST price: original price = total price / (1 + GST rate / 100)

With these formulas at hand, follow these steps to work out what your business owes:

• Identify the applicable rate: Determine the correct GST rate for the goods or services being sold. Rates vary by category, so consult the official rate chart regularly to stay accurate.

• Differentiate your transactions: Separate taxable sales from nontaxable ones, and distinguish sales (for which you collect GST) from purchases (for which you may be able to claim GST credits).

• Calculate GST on sales: Apply the GST rate to the sale price of each good or service using the formula above. This is the output tax you collect from customers.

• Tally GST on purchases: Record the GST paid on business-related purchases. This is your input tax, and it may be claimed as a credit.

• Determine net GST: Subtract the total GST paid on purchases (input tax credits) from the total GST collected on sales (output tax). If the collected GST is more than the paid GST, the difference is what the business owes to the tax authorities. If the paid GST is more than the collected GST, the business might be eligible for a refund.

• Maintain recordkeeping: Keep detailed, accurate records of all sales and purchases with corresponding GST amounts. This is nonnegotiable for precise calculation and compliance.

• Make regular updates: Update these figures each reporting period, and stay informed on changes to GST legislation that could affect your rates or obligations.

GST compliance considerations

Beyond the calculation itself, several factors shape how GST applies to your business day to day. Your sales volume affects how much GST you collect and how many credits you can claim, while your business size and model (for example, a wholesaler versus a retailer) can influence how GST is reported even for identical products.

Businesses supplying goods or services across borders also need to understand place of supply rules, which determine where a transaction is taxed and to which authority it's reported. Finally, choosing a reporting period (monthly, quarterly, or annual) that fits your operations and annual turnover helps keep budgeting and compliance manageable.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. 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 helps you monitor your obligations and alerts you when you exceed a tax registration threshold based on your Stripe transactions. It can also register to collect tax on your behalf in the US and manage filings through trusted partners. Stripe Tax automatically calculates and collects sales tax, VAT, and GST on:

• Digital goods and services in all US states and over 100 countries
  
• Physical goods in all US states and over 40 countries
  

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: If you need to register for a sales tax in the US, let Stripe manage your tax registrations. You’ll benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations. If you need help registering outside of the US, Stripe partners with Taxually to help you register with local tax authorities.

• 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. US tax filings can be automated in the Stripe Dashboard, powered by TaxJar.

Learn more about Stripe Tax, or get started today.