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GST check list
WHK tax consultant Jarod Chisholm has prepared some of
the common issues that businesses will face as they
prepare for the rise in GST on October 1.
•
Computer cashbook software:
Many computer software developers will not provide
updates for older versions of electronic cashbooks to
enable them to deal with the increase in GST rates.
•
Electronic retail systems:
Retail businesses tend to use electronic systems such as
cash registers to record the sales transactions and most
of those devices produce a tax invoice for the customer.
Those systems will have to be reprogrammed to reflect
the GST increase.
•
Contracts:
Where a contract is entered into and the time of supply
is after October 2010 but before December 31, 2010, the
consideration in the contract may increase. This may
catch out many taxpayers who are unaware of the
technicalities.
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•
Insurance contracts:
Many businesses pay insurance monthly. Whether the monthly payment will increase
after October 1 will depend on the actual contract.
• Leases: As with
insurance contracts, this will depend on the actual contract and how the
consideration is worded.
•
Electricity and gas:
If you pay on an estimated or fixed price agreement, check if you will be
invoiced a "wash-up" amount in October.
•
Alternative balance dates:
All businesses will be required to file a GST return for the period ended
September 30, 2010, irrespective of when they would normally file them. As many
businesses have alternative balance dates, this will create additional
compliance for them.
•
Transitional adjustments:
As many businesses return GST on a cash basis, the GST return for September 30
will most likely require additional information such as the debtors and
creditors at this time. This will involve additional work for businesses.
•
Stock on hand:
Many businesses selling to the public may want to reduce stock levels. As such,
many businesses will sell as much stock as they can before October 1 when their
margins are better.
•
Price points:
A business that is a price maker may be able to increase the cost of GST and
consumers will still buy the products. For price takers, the GST cost will have
to be absorbed. Many businesses will see this as a chance to increase the price
of their goods and services, resulting in the cost of many goods and services
increasing by more than the GST amount.
•
Lay-bys:
Technically, it appears that businesses will be able to increase the cost on a
lay-by after October 1. However, this is not likely to be well received by the
consumer and it is not anticipated that lay-bys will be increased.
•
Annual accounts:
As the GST change is occurring part-way through the financial year, the
completion of the annual accounts for the 2011 income year will be more complex.
There are also several issues that will arise in relation to some specific
businesses.
• Tourism operators will need advice on how to deal with holidays quoted or paid
for now, but taken after October 1. Where a hotel has taken a deposit for
accommodation which occurs after October 1, depending on the contract, it may
not be able to recover the additional GST which they will be required to return.
• As the change is to occur at midnight on September 30, businesses open 24
hours or open at this time (bars and restaurants) will technically have to
charge GST at 15% from midnight. For many businesses, rather than effecting the
change at midnight, they will elect to bear the additional cost of the GST
increase until the next day when their systems can be updated and prices can be
changed.
Some businesses may raise prices early to increase the margin on sales before
midnight.
The GST advisory panel had been established to advise the Government and
businesses of issues and common concerns.
Although that might mean the IRD could address matters promptly, it was unlikely
to create any certainty for taxpayers struggling with the implementation of
change.
Source: Otago Daily Times,
New Zealand, dated 26/06/2010
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