GST Advisory Panel meets

PANEL UPDATE #1

GST Advisory Panel meets

21 June 2010

The GST Advisory Panel had its first meeting on Thursday, 17 June to consider transitional issues that businesses are facing in relation to the GST rate increase. The Panel is already aware of a number of questions and concerns that businesses have. Most of the issues concern the time of supply rules and the impact the increase in GST will have on various supplies that straddle 1 October 2010. Issues discussed at the meeting included:

• Contracts that the span the GST introduction date of 1 October.

An important issue is the “time of supply” of goods and services as the time of supply will determine if the appropriate GST rate is 12.5% or 15%. This is particularly important when goods or services are supplied during a period that includes the GST rate change date. This for example includes insurance contracts where the invoice for the insurance is issued prior to the date of the GST change, but payments are made monthly over a twelve month period.

• Contracts that span 1 October 2010 also include contracts for the sale and purchase of land which become unconditional prior to 1 October 2010, [the rate change date], but which are settled on or after 1 October.

• Similar issues in respect of both operating and financing leases that are entered into prior to the GST change date, but which continue after 1 October 2010, for example motor vehicle leases.

• Industry-specific transitional issues including tourism products. There are potential issues where tourism packages have been sold overseas prior to the GST introduction date but the tourists do not arrive in New Zealand until after the introduction of the 15% rate.

• The panel is aware of the difficulties for Local Authorities whose rates year runs from 1 July 2010 to 30 June 2011. Issues arise in respect of the correct GST treatment when the period includes a change in the GST rate.

• The panel is also aware that some issues will arise for businesses in ensuring their systems are updated for the rate increase.

• There are also concerns being raised about the filing of GST returns where an organisation’s GST return date is not on the 30 September. This will involve the return for that period being partially at the old rate, and partially at the new rate.

The Panel will continue to consider issues as they arise, and will provide comment on this site on a regular basis.

Ends

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