The GST is essentially a value added tax (VAT). Tax is paid at each step along the chain of transactions involving the goods or services until the end-user is reached and, broadly speaking, tax is paid on the value added. However, it is the consumer or end-user who will ultimately bear the tax (see the example below). Entities making taxable supplies will receive a credit for the GST paid on inputs (''input tax credit'' . If the GST charged by an entity on the goods and services it supplies (the GST liability) exceeds the input tax, then it only pays the net amount. If the GST liability is less than the input tax, then the entity will be entitled to a refund. Provisions exist to adjust the net amount if the supply is cancelled or a discount is given.

An input tax credit may only be claimed to the extent of the ''creditable purpose'' (which broadly refers to the business use. If the creditable purpose changes, then the entity may be required to make an adjustment to later GST returns.

The tax will be imposed on ''taxable supplies'' , which embraces virtually all activities involving the supply of goods or services. The entity making the supply will be liable to pay the GST. The amount of GST will be 10% of the value of the supply. Displayed prices will include any GST payable. However, there will be two types of non-taxable activities under the GST:

The Act contains Schedules of Food that is not GST free; Beverages that are GST free and Medical Aids and Appliances that are GST free.

Being a multi-staged tax levied at all stages of production or sales with a credit or refund for input tax, the GST is more difficult to avoid than a retail sales tax, which is the other principal type of broad-based goods and services tax. A retail sales tax is imposed as a single-stage levy on consumer goods applied to the retail value of the product at the final point of sale to the final customer.

Because entities will be collecting GST, there have to be registration requirements. Those whose annual turnover exceeds a set threshold will be required to be registered. For those under the threshold, registration will be optional. Registered entities will need to maintain supporting documentation in the form of prescribed tax invoices for all individual taxable supplies. They will also have to submit GST returns to the ATO with their GST payment or GST refund claim. For large taxpayers, this must be done electronically.

Liability to GST generally arises when an invoice is issued or when any consideration is received, whichever happens first. Most large businesses will account for GST on an invoice basis, as the cash basis is only available where annual turnover is less than $500,000.

The accounting period is also determined by annual turnover. If an entity's annual turnover is $20 million or more, then it must adopt a monthly tax period. Other entities may use quarterly tax periods, with the option of adopting monthly periods if they wish.

Company groups are allowed to register one representative member in their group, allowing intra-group transactions to be ignored for GST purposes. Similar rules for company branches and joint ventures are designed to reduce unnecessary administrative burdens and costs of accounting.

All GST supplies will be subject to review under the very broad general anti-avoidance provisions, similar to those in the income tax regimes. These provisions will certainly impact on GST planning strategies, and may also impact on an entity's response to the complex transitional provisions.