What is GST (Goods and Services Tax)?
GST (Goods and Services Tax) explained in plain English. Learn how GST works in Canada, Australia, India and other countries, how it differs from VAT, and what freelancers need to know about GST on invoices.
What Is GST (Goods and Services Tax)?
GST (Goods and Services Tax) is a broad-based consumption tax applied to the supply of most goods, services, and intangible products sold for domestic consumption. It's the name used by Canada, Australia, New Zealand, India, Singapore, Malaysia, and several other countries as their national sales/consumption tax equivalent of Europe's VAT. In countries that use it, GST is typically added to the sale price of most products and services, collected by businesses at the point of sale, and remitted regularly to the government tax authority. The consumer ultimately pays the GST, but businesses act as collection agents.
How GST Works in Key Countries
Canada has a multi-layered system: - GST (Goods and Services Tax): 5% federal tax applied across Canada - HST (Harmonized Sales Tax): In ON, NB, NL, NS, PE — combines federal GST with provincial PST into one tax (13–15%) - PST (Provincial Sales Tax): In BC, SK, MB, QC — separate provincial tax added on top of federal GST For Canadian freelancers: - Must register for GST if revenue exceeds CAD $30,000/year - Charge 5% GST on invoices for most services - Claim input tax credits (ITCs) for GST paid on business expenses - File GST returns (monthly, quarterly, or annually depending on revenue) Example: Toronto freelance developer Jake invoices a client $5,000 for a web project. He adds 5% GST = $250. His client pays $5,250. Jake remits the $250 to the CRA, minus the $50 GST he paid on his $1,000 software subscription. Net GST remitted: $200. Australia (GST) - Rate: 10% on most goods and services - Registration threshold: AUD $75,000 in revenue - Reporting: Quarterly BAS (Business Activity Statement) to ATO - Note: Some items are GST-free (fresh food, healthcare, education) or input-taxed (financial services, residential rent) Example: Melbourne graphic designer Priya invoices $3,000 for brand work. She adds 10% GST = $300. Total: $3,300. She files her quarterly BAS, remitting $300 minus any GST paid on expenses. India (GST) India's GST system is more complex, with multiple rate slabs: - 5%, 12%, 18%, 28% — rates vary by service category - Threshold: INR 20 lakhs (INR 2 million) — higher in some states - Composition scheme: Lower-rate option for small businesses - Filing: Monthly GSTR-1 (sales) and GSTR-3B (summary) returns For digital services provided by foreign companies to Indian consumers, India's reverse charge mechanism applies — the Indian recipient pays and remits the GST.
GST on International Freelance Services
This is where things get tricky for cross-border freelancers: Selling services to overseas clients (exporting services): - In Australia and Canada, services exported overseas are often zero-rated (0% GST) — meaning you don't charge GST, but can still claim credits for GST paid on expenses - In India, exports of services are generally exempt Selling services to clients in countries with GST: - Non-resident digital service providers (Netflix, Spotify, SaaS companies) must register and collect GST in some countries - As a freelancer, if you regularly provide services to clients in a country with GST, you may need to register there
GST vs. VAT: Key Differences
| | GST | VAT | |---|---|---| | Countries using the name | Canada, Australia, India, NZ, Singapore | EU, UK, China, Japan, Brazil | | Collection method | Often single-stage (final sale) | Multi-stage (each stage adds tax) | | Typical rate | 5%–15% | 17%–27% | | Registration threshold | Varies ($30k CAD, $75k AUD, etc.) | Varies significantly by country | | Refund mechanism | Input tax credits (similar to VAT) | VAT deduction on inputs |
What Freelancers Need to Do
1. Know your country's rules — GST obligations differ significantly by country and change regularly 2. Register when required — don't charge GST without registering; it's illegal 3. Track GST separately — keep GST collected on invoices distinct from your revenue 4. Claim credits for GST paid — GST on business expenses is usually recoverable 5. File on time — late filing penalties can be significant (e.g., 5% per month in Canada) 6. Use invoicing software — Eonebill handles multi-country tax calculations automatically Running a freelance business across borders? Start your free Eonebill trial to manage international invoicing, multi-currency billing, and automated tax calculations — built for globally-minded freelancers. Want to understand how consumption taxes work globally? Learn about VAT — the European equivalent of GST. View Pricing → | Glossary Home → | Home →