Overview
This guide walks through the entire life cycle of indirect tax compliance: eligibility, registration, invoicing, periodic reporting, and cross-border considerations. Each section highlights practical differences between VAT and GST so you can decide whether you need separate processes or a single consolidated approach. Real-world examples illustrate where businesses trip up, while short checklists show you how to stay on track.
For a broader introduction to global indirect taxes, see the Sales Tax Registration and Compliance Guide for Global Sellers.
Indirect tax comparison: why two names for a similar tax?
Most countries charge consumption tax on goods and services, yet they label it either Value Added Tax (VAT) or Goods and Services Tax (GST). Both taxes are multi-stage and credit-invoice based, but regional terminology and design choices influence how businesses interact with tax authorities.
Despite naming differences, both models tax the incremental value added at each stage of the supply chain, then refund or credit tax paid on purchases. Still, subtle policy choices - rates, thresholds, reverse-charge rules - affect compliance workload.
Understanding these nuances starts with knowing when you must register. For further practical implications of GST and VAT globally - including threshold rules and compliance checklists - see Goods and Services Tax (GST) Explained: A Complete Guide.
Eligibility thresholds: when VAT vs GST registration becomes mandatory
Many jurisdictions exempt small enterprises from charging indirect tax until their annual turnover crosses a set limit. Threshold design is where VAT and GST often part ways.
-
Most OECD nations, except Chile, Mexico, and Spain, use registration thresholds that exempt small businesses
-
GST countries such as Australia (AUD 75 000) and India (INR 4 million for goods) have distinct limits aimed at micro enterprises.
-
The EU sets a EUR 10 000 cross-border distance-selling threshold for micro e-commerce sellers, while each member state keeps a domestic limit.
For more on region-specific VAT thresholds, visit the VAT Compliance Checklist for Startups and Small Businesses.
Failing to monitor turnover against multiple limits causes accidental non-compliance. One SaaS company with EUR 85 000 sales into Germany missed the fact that local services have no threshold for non-established suppliers. A three-month delay cost it EUR 4 100 in late-registration interest.
Checklist: monitor threshold exposure
-
Track taxable turnover per country, not just global revenue.
-
Update exchange rates monthly if the threshold is set in local currency.
-
Factor in related entities; some jurisdictions aggregate group sales.
-
Schedule automatic alerts when sales reach 75 percent of any threshold.
Once liable, the next step is securing a tax ID.
Registration process, step by step
While VAT and GST authorities share the core requirements - business identity, proof of establishment, bank details - the paperwork and waiting time differ.
For a step-by-step breakdown, see How to Register for GST: A Step-by-Step Guide.
Required documents
-
Certificate of incorporation or business registration.
-
Proof of address: utility bill, lease agreement, or local agent contract.
-
Bank statement showing the legal entity’s name.
-
Sales invoices to show taxable activity if you apply retroactively.
A company expanding across 10 EU countries can either submit individual VAT applications or opt for the One-Stop Shop (OSS) regime for B2C digital services. By contrast, Singapore’s GST Office offers an e-filing portal that approves straightforward applications in roughly 10 working days.
Registration lead times
-
EU large member states: 2–8 weeks, paper originals often required.
-
Canada: 1–3 weeks online, no notarized documents needed for non-residents.
-
India: 5–10 days if Aadhaar verification succeeds, 3–4 weeks otherwise.
Waiting time matters because you must start charging tax from the date you become liable, even if the number arrives later. Bridging invoices may require “Tax pending” wording, followed by re-issuance once the ID is granted.
A specialised provider such as 1stopVAT can bundle multi-country VAT applications into a single project, reducing administrative duplication across more than 100 jurisdictions.
Key takeaway: prepare documents early and factor in local quirks to avoid issuing non-compliant invoices during the gap.
Invoicing rules: VAT vs GST mechanics
After registration, the invoice becomes your primary compliance tool. Both VAT and GST rely on invoice-based crediting, yet the required data fields and deadline rules vary.
-
VAT invoices in the EU must state “VAT” and show a sequential number, seller VAT ID, buyer VAT ID (for B2B intra-EU sales), tax rate, and amount.
-
India’s GST rules require an HSN/SAC code, place of supply, and whether IGST, CGST, or SGST applies.
-
Canada’s GST/HST invoices demand supplier BN, tax rate, and indication of zero-rated or exempt status.
Missing a mandatory field can invalidate the buyer’s input tax credit. In a Netherlands audit, a logistics firm lost 7% of its claimed input VAT because the foreign supplier’s invoices lacked an EU VAT ID.
For best practices on issuing compliant invoices and staying audit-proof, consult VAT Reporting Made Simple: Best Practices for Businesses.
How to bulletproof your invoices
-
Map mandatory fields per jurisdiction into your ERP template.
-
Design logic that flags rate changes automatically at transaction time.
-
Issue credit notes referencing the original invoice sequence when errors occur.
-
Store electronic copies for the statutory retention period, typically 7–10 years.
A final note: some GST regimes, such as India and soon Australia, are moving toward real-time e-invoicing. VAT countries are close behind, with France and Poland slated to mandate structured e-invoices in the next two years.
Reporting and filing obligations
Collecting the tax is only half the job; you also need to report it. Frequency, return format, and payment mechanics are where VAT and GST split most visibly.
To turn VAT reporting from a headache into a routine task, review VAT Filing & Returns: A Complete Guide for Businesses.
Filing frequency
-
VAT: monthly in most EU countries unless turnover is low, then quarterly.
-
UK VAT: normally quarterly but can switch to monthly to accelerate refunds.
-
Australia GST: quarterly for small businesses, monthly for larger taxpayers.
-
India GST: GSTR-3B monthly for most, with quarterly options under QRMP.
Return formats
-
VAT returns list total output tax, input tax, net payable, plus transaction breakdown by rate.
-
GST returns in India require line-level reconciliation between supplier and buyer via the GSTR-2A auto-draft.
-
Canadian registrants file a simplified GST/HST return with only five key boxes, yet must keep detailed records for audits.
Payment and refund cycles
-
Many EU treasuries auto-refund excess input VAT within 30–60 days, although backlog can stretch that timeline.
-
GST in New Zealand issues most refunds within 15 working days, faster than its VAT peers.
-
India takes longer: input tax credit is offset against liabilities before any cash refund, and that can take months if manual verification arises.
Why track these timelines? Indirect tax can be material: VAT averaged 6.8 percent of GDP and 20.4 percent of total tax revenue in OECD countries in 2018. Governments guard this cash flow closely, and delays result in interest that is rarely deductible.
Practical tips to stay compliant
-
Calendar statutory due dates plus internal cut-off at least five days earlier.
-
Reconcile ERP tax ledger to general ledger monthly even if you file quarterly.
-
Use a separate bank account for tax payments to avoid missing deadlines.
-
Keep audit files (returns, ledgers, supporting invoices) in a searchable archive.
When operations span VAT and GST countries, consider a unified filing dashboard that tracks all obligations side by side.
Managing cross-border operations: one tax number or many?
E-commerce and digital services often trigger multiple registrations. The EU VAT One-Stop Shop simplifies B2C reporting to a single quarterly return, whereas Australia and Singapore offer simplified GST for low-value imported goods. However, a SaaS vendor selling to EU businesses might need regular VAT, OSS, and UK VAT numbers simultaneously.
Read up on broader challenges and practical tactics in Cross-Border Tax Compliance: Tips for Global Businesses.
Key decision factors
-
Place of supply rules: does the tax sit where the seller or customer is located?
-
Marketplace liability: in some countries platforms must collect the tax, removing the seller’s obligation.
-
Reverse charge: B2B cross-border services often shift the collection obligation to the buyer, avoiding the need for seller registration.
-
Permanent establishment: having staff or inventory in-country usually triggers full registration.
A consolidated provider such as 1stopVAT can analyse supply chains, flag duplicate registrations, and cancel numbers that have become dormant, preventing dormant-account penalties.
Cross-border takeaway: map each transaction type against place-of-supply rules so you only hold registrations you genuinely need.
What is the difference between VAT and GST registration?
Difference between VAT and GST registration: VAT is used mainly in Europe and Africa, while GST is common in Asia-Pacific; both require businesses to register once their taxable turnover exceeds a country-specific threshold, but VAT registration often involves separate numbers per EU state unless schemes like OSS apply, whereas GST countries usually issue one national number covering all regions.
Conclusion
VAT and GST share the same economic aim - taxing consumption without cascading effects - yet they diverge in thresholds, registration mechanics, invoicing, and reporting. Treat each jurisdiction as unique, keep turnover under constant review, and align your ERP settings with local invoice rules. When complexity escalates, partnering with a global compliance specialist ensures you stay within the rules while focusing on growth.
