GST and exported goods

GST and exported goods

Section 11(1)(eb) of the Goods and Services Tax Act 1985

The Goods and Services Tax Act 1985 has been amended to allow, in limited circumstances, non-resident purchasers to receive in New Zealand zero-rated exported goods. The amendment is intended to apply to commercial exports to non-residents that are removed from New Zealand by the non-resident - for example, by carrying the exported goods on the non-resident's vessel.

Background

When the possession or delivery of goods occurs in New Zealand, GST generally applies at the rate of 12.5%. This is consistent with the objective that GST applies to goods that are consumed in New Zealand. If the goods are available for use in New Zealand for the purpose for which they are intended, consumption is considered to have occurred and GST applies. This outcome can be problematic, for example, if the exported goods are supplied on "free on board" terms and title to the goods passes to the non-resident - who is in New Zealand - when the goods are physically supplied. This can occur when goods are loaded over a ship's rail at the export port.

Under the general zero-rating provisions, goods supplied in such circumstances cannot be zero-rated as it is necessary for the New Zealand exporter to enter the goods for export under the Customs and Excise Act 1996 and export the goods.

To satisfy the requirements of the GST Act, exporters have in the past used arrangements that treat the non-resident purchaser as the exporter's agent. The amendment removes the necessity for such arrangements in situations where the non-resident purchaser takes title to goods for the purposes of removing them from NewZealand.

The amendment was added to the bill in response to a submission to the Finance and Expenditure Committee concerning the supply of oil extracted from New Zealand's natural field reserves to non-residents who take delivery of the product using their own oil tankers.

Key features

New section 11(1)(eb) allows non-residents to take delivery of zero-rated goods in New Zealand, subject to the application of the 28-day rule in section 11(4) of the GST Act, if the following cumulative conditions are met:

• the goods have been entered for export by the supplier under the Customs and Excise Act 1996 (or will be entered for export as a condition of the supply);
• the goods are exported by the recipient;
• the recipient does not intend to reimport the goods into New Zealand (this intention must be documented);
• the goods are not used or altered by the recipient, except to the extent necessary to prepare the goods for export;
• the goods leave New Zealand under an arrangement agreed by the supplier and the recipient at or before the time of supply; and
• the goods do not leave New Zealand in the possession of a passenger or crew member of an aircraft or ship.

Consequential changes have also been made to sections 11(4) and 11A(1)(m) of the GST Act. The amendments do not affect the current GST rules as they apply to personal or duty-free items acquired by non-resident tourists while in New Zealand.

Application date

The change applies from 17 May 2007, the date the bill was introduced.