GST vs. SST — What's the Difference?

GST, or Goods and Services Tax, is imposed at every stage of the production and distribution chain with the benefit of input tax credits. It typically consists of taxes on goods and services, enabling a transparent and uniform tax structure. On the other hand, SST or Sales and Service Tax, is levied at a single stage, either at the time of manufacturing or at the point of importation, leading to a system where tax cascading can occur.

In the realm of taxation, GST provides more comprehensive coverage, subsuming multiple indirect taxes under a unified umbrella, fostering uniformity and simplicity. In contrast, SST is generally considered more narrow in scope, applying predominantly to the manufacturing and importation sectors, and can lead to tax compounding due to its singular stage application.

GST is typically structured to be a destination-based tax, meaning it is applied where goods or services are consumed, contributing to equitable distribution of tax burden among consumers. SST, conversely, doesn’t adopt the destination principle, and is instead imposed at the manufacturing or importation level, possibly leading to uneven tax incidence on end consumers.

The implementation of GST aims at removing the cascading effect of taxes and provides credit for the input tax paid at each stage of production or service delivery. SST, by its very structure, does not mitigate tax cascading and does not offer input tax credit, potentially impacting the final pricing of goods and services.