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6.1 GoodsandServicesTax%28word%290

6.1 GoodsandServicesTax%28word%290 - ACIS 254 1 AND 2 APRIL...

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ACIS 254 1 AND 2 APRIL 2009 LECTURE 16 & 17: GOODS AND SERVICES TAX Administration: Reading: NZT Ch. 19 TOPIC 1. Introduction [NZT 19.1.1] Why have a goods and services tax (GST)? (i) It broadens the tax base, ie more aspects of economic activity are caught in the tax net. It also reduces the government’s reliance on personal income tax. (ii) It has a simple flat rate (but it is regressive). (iii) It is an excellent source of revenue (approx 19% of total tax revenue). (iv) It is less easily evaded than income tax (tax invoices are required for input tax claims by suppliers and consumers must pay the GST to get a receipt). GST in general GST is imposed on all goods or services supplied (excluding exempt supplies ) in New Zealand by a registered person in the course or furtherance of a taxable activity carried on by that person: s 8 GST Act. It is also charged on goods (and some services) imported into NZ (s 12 GST Act). GST is a broad-based consumption (transaction-based) tax with the cost borne by the final consumer. It is charged at the rate of 12.5 percent (originally 10%) on a comprehensive range of goods and services (both NZ made and imported) as from 1 October 1986. It is internationally recognised for its simplicity and comprehensiveness. When a price is described as "GST inclusive", this means the price includes GST (eg $1,125 GST inclusive ). To calculate the GST component, divide the GST inclusive price by 9 (eg $1,125/9 = $125 GST). The term "GST exclusive" means the price excludes GST (ie $1,000). To determine the GST to add to a GST exclusive price, multiply the price by 12.5% ($1,000 x .125=$125 GST). Unless stated otherwise all references in these notes are to the Goods and Services Tax Act 1985. TOPIC 2. "A registered person": requirement to register for GST [NZT 19.2.1] GST is charged on supplies made by a registered person. If a person carries on a "taxable activity" and makes (or will make) taxable supplies in New Zealand exceeding $40,000 in a 12-month period (ie annual turnover), that person must be registered for GST: s 51(1). From 1 April 2009, this threshold increases to $60,000. Below the registration threshold it is at the option of the supplier as to whether or not they register - called a “voluntary” registration: s 51(3). There are fines for failing to register within the statutory time of 21 days of knowing when supplies exceed $40,000 pa ($60,000 pa from 1 April 2009) (see s. 51 GST Act). There is no requirement to register if taxable supplies exceed $40,000 [$60,000] solely as a result of: (i) ceasing to carry on a taxable activity (see Topic 11); (ii) substantially and permanently reducing the size and scale of operations which results in extra sales of stock or plant; or (iii) a capital asset being replaced. TOPIC 3. Important definitions
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2 (i) Goods: All personal and real property but does not include choses in action, money or (from 1 January 2005) supplies from a non-resident to a resident of digitised products such as software downloaded over the internet or by any other electromagnetic system: s 2 GST Act. A chose in action is a personal right of property which can only be enforced by (legal)
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6.1 GoodsandServicesTax%28word%290 - ACIS 254 1 AND 2 APRIL...

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