GST is said to be indirect and broad based because, it is charged depending on the supply or activities of good and services instead of being charged directly on income. Also, these charges are applied generally to all taxpayers with a few limitations. Taxation under GST is applied on the goods and services that are used by consumers, meaning that, this system is a consumption taxation system. A step process is used in collection of taxes under GST, to make sure that tax is levied at every stage of production chain, and also to allow suppliers of goods and services who are registered to claim credit on tax paid to their inputs. Although tax is charged at every stage, tax is paid finally by the consumer at the end spot. For a firm to be able to take credit on GST, they must be registered . Thus, if they do not apply to be registered under GST, they are treated as the end consumers and can only enjoy the GST credit they incur.
GST is classified into three types of supplies namely; taxable supplies, input tax supplies and GST free supplies. GST liability is created out of supply, but it is not created by the GST registered entity. The rules of GST do not apply if the supplies of either goods or services came to force before 1st July 2000, and in accordance to set special rules, gifts, when supply is made by entities not registered, or which are not required to register and when the transactions involved are not connected to Australia. ...Show more