Questions we've been asked: Goods and services tax (GST)

QB 10/05: Section 78(3) of the GST Act 1985

Section 78(3) of the Goods and Services Tax Act 1985 relevantly provides that, where an alteration in the law is made (such as an increase in the rate of GST), any fee, charge or other amount prescribed by or determined pursuant to any Act or regulation in respect of any supply of goods or services shall, unless provision to the contrary is contained in that Act or regulation, be deemed to be modified so as to increase the amount of fee or charge by the amount of tax chargeable.

We have been asked whether the phrase "unless provision to the contrary is contained in that Act or regulation" in section 78(3) is triggered merely by a reference to an amount being "GST inclusive".

An item in Public Information Bulletin No. 181 (June 1989), stated that where an Act or regulation provides that a fee or charge is inclusive of GST, section 78(3) will not apply to allow the relevant Department to increase that amount to take into account the increase in the rate of GST. Such a provision was considered to be a contrary provision for the purposes of section 78(3).

The Commissioner now considers that the above statement is incorrect. For section 78(3) to not apply when the GST rate increases from 1 October 2010, there must be an explicit statement in the Act or regulation that the amount charged must not be increased by the change in the GST rate. It is not sufficient that the amount is stated to be "GST inclusive". If there is no contrary provision in the Act or regulation, the relevant Department will be able to increase the amount to take into account the change in the GST rate effective from 1 October 2010.

Other pages in: Goods and services tax (GST)

• QB 10/02: GST treatment of futures contracts
• QB 09/04 The relationship between section 113 of the TAA and the proviso to section 20(3) of the GST Act
• QB 07/04 Trophies and animal products derived from the tourist, hunting and safari industry that are to be mounted in New Zealand - zero-rating
• QB 07/03 Trustees in the context of the Goods and Services Tax Act 1985: does a separate trustee capacity and personal capacity exist and do separate trustee capacities exist for trustees of multiple trusts?
• GST and bloodstock destined for export
• QB 07/01 Zero-rating of supplies of sail-away boats - use as security or offered for sale
• GST treatment of services provided in making videos and films in New Zealand under contracts with non-residents
• GST treatment of funding provided to Treaty of Waitangi claimants by the Crown through the Office of Treaty Settlements
• Advertising agencies: placement and creative services supplied to non-residents
• Real estate sale and purchase - GST apportionments of income and expenditure
• Funeral expenses paid by funeral directors in connection with funeral arrangements
• Cash prizes in sporting competitions - GST implications for organising club
• Trophies and animal products derived from the tourist, hunting and safari industry: zero-rating under GST
• GST consequences of a cancelled contract
• GST Group Registration of Trusts (July 2004)
• Deductions from GST output tax for subsequent changes to taxable use (April 2005)

Date published: 22 Jul 2010

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