GST Question

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12 years 4 months ago #22169 by Toast
GST Question was created by Toast
Am I correct?

I have a business & am registered for GST. When I supply goods to retail businesses I must charge GST.

If one of those businesses is not registered, I must still charge them GST, mustn't I?

As I understand it nobody is exempt from paying GST.

As I understand it, they must pay GST on the goods they purchase but cannot add GST onto those goods when they sell them.

As I understand it, they cannot claim back the GST on the goods they have purchased.

Their only real advantages I see are that they can charge slightly less for their goods and they don't have to furnish a GST return.

Have I got all his right?

Thanks.

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12 years 4 months ago #319718 by Valmai
Replied by Valmai on topic GST Question
Yes
Yes
Yes
Yes
Yes
Yes
Yes. [^][^][^]

Carbon-based biological unit.

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12 years 4 months ago #319719 by Hawkspur
Replied by Hawkspur on topic GST Question

Toast;305240 wrote: Am I correct?

I have a business & am registered for GST. When I supply goods to retail businesses I must charge GST.
If one of those businesses is not registered, I must still charge them GST, mustn't I?
As I understand it nobody is exempt from paying GST.
As I understand it, they must pay GST on the goods they purchase but cannot add GST onto those goods when they sell them.
As I understand it, they cannot claim back the GST on the goods they have purchased.
Their only real advantages I see are that they can charge slightly less for their goods and they don't have to furnish a GST return.
Have I got all this right?
Thanks.

Yip, you have it right. They still have to pay GST on any goods or service they buy from any GST registered business, otherwise no end customer would have to pay any GST. eg: people buying their groceries are not usually GST registered, but have to pay it.

Another potential disadvantage for an non GST registered business, depending on the market they are in, is that some other businesses may regard them as not a serious or long term business, because the threshold is quite low.

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12 years 4 months ago #319728 by max2
Replied by max2 on topic GST Question
yes, everyone (a resident in NZ) is liable to pay GST in NZ, and if they manage to offset their GST with the IRD then it becomes their business reflected appropriately in their GST return.

however if you are supplying to an off shore customer, then GST doesn't apply. Check out the IRD site for more info if supplying an off shore customer.

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12 years 4 months ago #319736 by DiDi
Replied by DiDi on topic GST Question
Yes to your business but there are some tricky situations out there as regards Real Estate. I recently fronted this with a Real Estate person and asked "what do the words "GST if applicable mean"? The answer was that you the buyer have to pay the GST.

My reply was "sorry but I am not registered for GST so why should I pay the Vendor's GST when they have had the benefit of it and there is no gain for me?

Does that not make you stop and think about how rubbish GST is for the majority of NZers who are not GST registered. We pay and yet the seller can claim it back! That's an additional 12.5% profit to them. OK - so they had to pay it to buy the item in the first place so who exactly is NOT paying GST? Honestly, I can't make sense of it at all unless it is to rip off the people who are not registered and that is everything from food, clothing etc. Why have it in the first place if it is just a merry go round of passing it on? I want to know - who in this merry go round does not pay GST? The Manufacturer maybe?

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12 years 4 months ago #319739 by GrantK
Replied by GrantK on topic GST Question

DiDi;305261 wrote: Does that not make you stop and think about how rubbish GST is for the majority of NZers who are not GST registered.

Exactly! That's the whole point of GST. The end user/consumer pays the full whack of GST on the final retail price and cannot claim it back whereas everybody else along the chain can. Sucks really doesn't it :( :( :(

But that's the way it has been since 1984; nothing new here [xx(]

Prior to the introduction of GST, there was a nightmarish range of Sales Taxes on many goods, but not all. The rates ranged from 10% to 40% AFAIK and there were many anachronisms.

For example, the first computer we bought for our business incurred a sales tax of 40% [:0] [:0] [:0]

Whereas if we bought such a computer as part of a data logging system, the sales tax was only 10% :confused:

Sales Taxes were an administrative nightmare yet many countries around the world still have them; particularly those in North America. You go into a shop to buy something, and at the till, you always pay more than the marked price by 7.5%, 10%, 12.5% or 15% depending on what you are buying. That to me, is much worse than GST, where the marked price is what you pay in a retail store.

DiDi;305261 wrote: We pay and yet the seller can claim it back! That's an additional 12.5% profit to them. OK - so they had to pay it to buy the item in the first place so who exactly is NOT paying GST? Honestly, I can't make sense of it at all unless it is to rip off the people who are not registered and that is everything from food, clothing etc. Why have it in the first place if it is just a merry go round of passing it on? I want to know - who in this merry go round does not pay GST? The Manufacturer maybe?

Even the manufacturer pays GST DiDi. So does an importer if the value of the goods is over $400.

There really is no way out of paying GST unless you pay cash under the table for something. Your point about it being a GST merry-go-round is valid, and it is for this reason that some countries (e.g. UK) call it "Value Added Tax" or VAT. The net amount of GST that manufacturers, importers or wholesalers end up paying is 12.5% of the difference price between their buying and selling prices. That is the same as saying 12.5% of the value they have added along the way i.e. gross profit, hence the VAT idea.

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12 years 4 months ago #319743 by Jack
Replied by Jack on topic GST Question
Gidday

Yes there is no way out of paying GST. And that includes getting registered.
You just caint win. Unless you have to, like earning more than the threshold which I think is 40,000 you are actually better off not to. All you gain is a head ache and a huge accountants bill.

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12 years 4 months ago #319745 by DiDi
Replied by DiDi on topic GST Question
So... if you go into an upmarket shoe shop and they are charging $150 for a shoe made in China with artificial this that and the other i.e. not leather and you then go to the well known shoe warehouse that is selling a "similar" shoe for $40, does that mean the stores with the expensive shoes are paying more GST or making more profit?

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12 years 4 months ago #319747 by Toast
Replied by Toast on topic GST Question
Thanks for all that.

Is there somewhere on the IRD site (I couldn't find anything) where it outlines that these businesses which are not registered must pay GST on their purchases.

I have two businesses which are not paying the GST on the goods I have supplied; one has said she is not registered. The other one has gone silent.

I shall probably ring IRD tomorrow & see if they have anything in writing I can send out with my 28/2 accounts to these people.

Thanks again.

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12 years 4 months ago #319750 by DrVee
Replied by DrVee on topic GST Question

DiDi;305261 wrote: Yes to your business but there are some tricky situations out there as regards Real Estate. I recently fronted this with a Real Estate person and asked "what do the words "GST if applicable mean"? The answer was that you the buyer have to pay the GST.


That's not my understanding. As I understand it, a property is advertised as (1) a set price, or (2) a set price plus GST, or (3) a set price plus GST, if any.

With (1) and (2), the buyer pays the price, or the price plus GST. That's straight forward, regardless of whether or not the buyer is GST registered.

With (3) if the SELLER will be GST registered. If the buyer is also GST registered, then GST is added. The seller then pays the IRD the GST and the buyer claims the GST back. If the buyer is NOT GST registered then no GST is added, and the seller has to deduct GST from the sale price and pay that to the IRD. The buyer cannot claim GST back.

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12 years 4 months ago #319751 by blimeyvicki
Replied by blimeyvicki on topic GST Question

DiDi;305261 wrote:
Does that not make you stop and think about how rubbish GST is for the majority of NZers who are not GST registered. We pay and yet the seller can claim it back! That's an additional 12.5% profit to them. OK - so they had to pay it to buy the item in the first place so who exactly is NOT paying GST? Honestly, I can't make sense of it at all unless it is to rip off the people who are not registered and that is everything from food, clothing etc. Why have it in the first place if it is just a merry go round of passing it on? I want to know - who in this merry go round does not pay GST? The Manufacturer maybe?

If you sell a property and are a GST registered entity and the selling price has gst included (or added to the saled price) then you PAY that GST to the IRD. If the purchaser of the property is GST registered then they are entitled to claim the GST back. If they are not registered then they are not entiteled to claim that GST back.

So the seller pays and the buyer claims back GST.

Manufacturers definitely pay GST - anybody who runs a business which turns over more than $40k MUST pay GST on what they sell and can claim back GST on what they buy. [:0]

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12 years 4 months ago #319754 by DrVee
Replied by DrVee on topic GST Question

Toast;305240 wrote: Am I correct?

I have a business & am registered for GST. When I supply goods to retail businesses I must charge GST.


Yes, correct, you charge GST on basically everything

Toast;305240 wrote: If one of those businesses is not registered, I must still charge them GST, mustn't I?


Yes you must.

Toast;305240 wrote: As I understand it nobody is exempt from paying GST.


Debatable. I doubt politicians pay it :D . Nor does the IRD :eek:

Toast;305240 wrote: As I understand it, they must pay GST on the goods they purchase but cannot add GST onto those goods when they sell them.
As I understand it, they cannot claim back the GST on the goods they have purchased.


They have to pay you your 'plus GST' price but they can't claim it (the GST) back off the IRD. If they then onsell something, then they don't 'add gst' as such, however if a GST registered company did buy the product then that company will then break their price down into a GST and non-GST part and claim back the GST portion.

Toast;305240 wrote: Their only real advantages I see are that they can charge slightly less for their goods and they don't have to furnish a GST return.

Have I got all his right?

Thanks.


Pretty much :-)

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12 years 4 months ago #319756 by Jack
Replied by Jack on topic GST Question
Gidday

DiDi;305270 wrote: So... if you go into an upmarket shoe shop and they are charging $150 for a shoe made in China with artificial this that and the other i.e. not leather and you then go to the well known shoe warehouse that is selling a "similar" shoe for $40, does that mean the stores with the expensive shoes are paying more GST or making more profit?

Yes to both DiDi. The shop with the expensive shoes are paying 12.5% on the higher price and also making a hellava lot more profit, but possible making less money per year because only silly people will be buying anything there.

Just to make it very plain, everyone pays GST on everything ecept wages and actual dwelling houses and rent of them.

It don't matter iffin you are registered or not you still pay GST but if you are registered you can claim it back off what you buy.

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12 years 4 months ago #319761 by DiDi
Replied by DiDi on topic GST Question
Thanks DrVee and apologies to Toast. Didn't mean to take it so off topic - but even I understood the answers. Still think it is a daft merrygoround but not the point regarding the info you wanted Toast. Phew - sorted I hope.

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12 years 4 months ago #319763 by GrantK
Replied by GrantK on topic GST Question

Jack;305281 wrote: Just to make it very plain, everyone pays GST on everything ecept wages and actual dwelling houses and rent of them.

Actually ... there is one more exception Jack:

- There is no GST on Financial Services such as Interest

If you look at the interest statement on a mortgage from your bank, there is no GST content. The same goes for Hire Purchase and maybe a few other similar financial services.

For this reason, Banks and Finance Companies cannot claim any GST on their inputs because they are not allowed to add GST to their outputs.

We ran into this unusual situation when selling some computer products to a bank. They could not claim back the GST cost which by law we were required to add to our selling price. For that reason, they wanted as sharp a deal as possible on the net selling price. We obliged them with that, but it was still very much worth our while :D

As Jack has mentioned, there is no GST added to residential rentals, but commercial rentals must have GST added.

Because there are so few exceptions, GST is a very simple tax to administer in NZ. In other countries including Australia, basic food items are exempt, but then all sorts of arguments arise as to which food items are "basic" and which aren't, and so it goes on...

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