For UK businesses trading internationally whether importing goods, exporting services, or expanding into markets like Australia, Canada, India, or New Zealand understanding the difference between GST (Goods and Services Tax) and VAT (Value Added Tax) is essential for compliance, pricing, and cash flow management. While GST and VAT share a common underlying concept, there are important structural, administrative, and rate differences that UK businesses and their accountants need to understand. This comprehensive AccFirm guide compares GST vs VAT tax, explains how each system works, and sets out what UK businesses need to know when operating across different tax jurisdictions.
What Is VAT?
VAT (Value Added Tax) is the UK’s consumption tax, applied to most goods and services at each stage of the supply chain. The UK VAT system operates under the VAT Act 1994 and is administered by HMRC. The standard VAT rate is 20%, with a reduced rate of 5% for certain goods (e.g. children’s car seats, home energy) and a zero rate (0%) for essentials including most food, children’s clothing, books, and public transport. VAT-registered businesses collect VAT from customers on taxable supplies (output VAT), reclaim VAT paid on their own business purchases (input VAT), and remit the net difference to HMRC typically quarterly under Making Tax Digital.
What Is GST?
GST (Goods and Services Tax) is a broad-based consumption tax used in several major economies instead of or alongside VAT. The term GST covers functionally similar taxes in different countries, including Australia, Canada, India, New Zealand, Singapore, and Malaysia. Despite the different name, GST and VAT operate on the same fundamental principle: tax is collected at each stage of the supply chain, businesses reclaim GST/VAT paid on purchases, and only the value added at each stage is ultimately taxed. The end consumer bears the full cost.
GST vs VAT: Key Differences
| Feature | UK VAT | Examples of GST Countries |
| Name of tax | Value Added Tax (VAT) | Goods and Services Tax (GST) |
| Standard rate | 20% | AU: 10% / CA: 5% federal + provincial / IN: 5–28% / NZ: 15% / SG: 9% |
| Reduced rates | 5% (limited categories) | Varies — India has complex multi-tier system (0%, 5%, 12%, 18%, 28%) |
| Zero rate | 0% on essentials | NZ: no zero rate (only exempt) / AU: some zero-rated exports |
| Registration threshold | £90,000 taxable turnover (2025/26) | AU: AUD 75,000 / NZ: NZD 60,000 / CA: CAD 30,000 |
| Filing frequency | Quarterly (or monthly) via MTD | Varies by country and turnover |
| Administered by | HMRC | ATO (AU), CRA (CA), IRAS (SG), GST Council/GSTN (IN) |
Australia: GST vs UK VAT
Australia introduced GST in July 2000 at a flat rate of 10% considerably simpler than the UK’s three-tier VAT structure. All GST registered businesses in Australia register with the ATO (Australian Taxation Office) when taxable turnover exceeds AUD 75,000 per year. UK businesses exporting goods or services to Australia with a business presence there may need to register for Australian GST. Key differences from UK VAT include:
- Australia has a single 10% rate no reduced rate and no zero rate for domestic supplies (though exports are GST-free)
- Fresh food is GST-free in Australia, unlike the UK where most food is zero-rated (functionally similar but technically different)
- Australia’s GST has no equivalent of the UK’s partial exemption rules in the same form
- Australian GST returns (Business Activity Statements) are typically quarterly
India: GST vs UK VAT
India’s GST system, introduced in July 2017, is one of the most complex consumption tax regimes in the world. It replaced a patchwork of central and state indirect taxes with a unified federal system but with four main rates (5%, 12%, 18%, and 28%) plus multiple exemptions and a cess (additional levy) on certain luxury goods. Key differences from UK VAT on shipping costs and goods that UK businesses importing from India should be aware of:
- IGST (Integrated GST): Applied to inter-state supplies and imports into India the rate that UK businesses pay on goods imported from India when purchasing from Indian suppliers
- Input Tax Credit (ITC): Similar to UK VAT input tax reclaim Indian businesses can reclaim GST paid on purchases against GST collected on sales
- GST on services: India charges GST on services at rates between 0% and 28% depending on the service type important for UK businesses importing services from India
- UK businesses exporting goods to India face IGST at the point of import into India, which their Indian customer can typically reclaim
Canada: GST/HST vs UK VAT
Canada operates a two-tier system: federal GST at 5% administered by the CRA (Canada Revenue Agency), plus provincial HST (Harmonised Sales Tax) or PST (Provincial Sales Tax) varying by province. Ontario charges HST at 13% (combining federal GST and provincial component). Alberta has no provincial sales tax. For UK businesses selling into Canada, understanding which provinces your customers are in determines the overall tax rate applicable.
New Zealand: GST vs UK VAT
New Zealand’s GST is one of the most internationally respected systems for its simplicity a flat 15% rate with very few exemptions. Unlike UK VAT, there is no zero rate for food or other essentials in New Zealand (most goods and services are fully taxable at 15%). New Zealand GST registration is required when taxable supplies exceed NZD 60,000 per year. UK digital services supplied to NZ consumers may require NZ GST registration under the remote services rules.
What UK Businesses Need to Know About GST When Trading Internationally
- Check registration requirements: Each country has its own GST/VAT registration threshold. Exceeding this in any market where you sell goods or services may trigger a registration obligation in that country.
- Understand the reverse charge: Many countries apply a reverse charge mechanism to cross-border B2B services the recipient accounts for the GST/VAT rather than the supplier. The UK uses the same system for B2B services received from overseas.
- Digital services: UK businesses supplying digital services (software, e-learning, streaming) to consumers in Australia, New Zealand, Singapore, and other GST countries may need to register for GST in those countries under non-resident digital services rules.
- Use a tax specialist: Cross-border GST and VAT compliance is complex. AccFirm works with international tax specialists to ensure UK businesses trading globally meet all their indirect tax obligations without overpaying or facing penalties.
Frequently Asked Questions: GST vs VAT
Is GST the same as VAT in the UK?
Functionally, GST and VAT are very similar both are multi-stage consumption taxes where businesses collect tax on sales and reclaim tax on purchases. However, the UK uses the term VAT (not GST), and specific rates, thresholds, and administrative rules differ significantly between the UK VAT system and GST systems in countries like Australia, Canada, and India.
Do I charge GST on exports from the UK?
No. Exports of goods from the UK are zero-rated for UK VAT. Your customers overseas will pay GST or VAT in their own country according to their local rules. You do not charge UK VAT on exports but you should retain evidence of export to justify the zero rating.
Can I reclaim UK VAT on goods imported from a GST country?
You pay import VAT (UK VAT at the UK rate) on goods imported into the UK not the foreign country’s GST. The GST is a cost in the foreign country borne by the seller there. The import VAT you pay to UK customs on importation is reclaimable on your UK VAT return as input tax.