VAT is Value Added Tax. in the UK and European Union it is a general, broadly based consumption tax assessed on the value added to goods and services.

GST is Goods and Services Tax. It's a form of Value Added Tax that's charged in countries like Australia, India, Canada, New Zealand, Singapore, and Hong Kong.

Enable VAT/GST -

To use the VAT/GST features within Moneydance, you need to enable this within your preferences.

To do this, open Moneydance and choose File > Preferences
(Using a Mac, choose Moneydance > Preferences)

Within the "General" tab you should enable the option "Use VAT/GST". Then press OK.

Set the VAT/GST Rate -

Then you'll need set the VAT/GST rate for each category.

You can do this when creating or editing each category via Tools > Categories.

You'll see that each category has the option "Use VAT/GST"

You can also view and edit all VAT/GST rates by selecting Tools > VAT/GST Settings.

In this window you'll see a table where you can enter the tax rates for each category, as well as the category to which the taxes will be assigned.

Using VAT/GST - 

Once a category has been assigned a tax rate and tax category, any new transactions that are assigned to the category will be split into two parts; the tax part, and the normal income/expense part.

The tax part of the transaction will be assigned to the specified tax category.

To split the transaction in this way, you must ensure the "Apply VAT/GST" checkbox is enabled when creating or editing a transaction. You'll see this checkbox when creating or editing a transaction, it's located just below the Check field.

If you have a large number of transactions that have not been split, select Tools > VAT/GST Transactions. This will display all of the transactions to which VAT/GST may apply (according to your settings), so that you can quickly set the rate or tax amount for each one.

This window will only display VAT/GST transactions for one account at a time, so you will need to repeat the process for each bank account, credit card, etc which has VAT/GST spending. You can amend the account at the top of the window.

You can also designate an income or expense category as “Tax Related.” This will make reporting easier at tax time.

When using either of the Income and Expense reports you'll see the option "Only Tax Related" which uses only categories set as "Tax Related".