GST on goods outside New Zealand at the time of supply

Section 11 of the Goods and Services Tax Act

Section 11(1)(j) of the Goods and Services Tax Act has been amended and confirms that goods, such as motor vehicles, that are contracted for and used in New Zealand but located outside New Zealand at the time of supply are charged at the standard rate of GST. It is a base-maintenance measure designed to prevent GST avoidance by using third parties to import goods that are offshore at the time of supply.

Background

Section 11(1)(j) previously zero-rated a supply of goods if the goods were outside New Zealand at the time of supply and were not entered for home consumption. The latter requirement was being used in certain circumstances to zero-rate the supply of goods in New Zealand by using an interposed third party. This practice was inconsistent with both the policy intent of the zero-rating rules and the wider objective of GST being a tax on goods and services supplied in New Zealand.

Key features

Section 11(1)(j) has been amended to allow zero-rating of goods outside New Zealand only if the goods are not in New Zealand at the time of delivery to the recipient. This confirms that the standard rate of GST should apply to goods consumed in New Zealand.

Section 11(1)(j) now requires that a supply of goods is zero-rated if the goods are not situated in New Zealand at the time of supply and:

1. the goods are not situated in New Zealand at the time of delivery;

and/or

2. the recipient pays GST under section 12 of the GST Act. (This ensures that if the recipient obtains the goods directly under a contract with a New Zealand GST-registered supplier, GST is not charged twice – once at the border under section 12 and again by the New Zealand supplier under section 8.)

Application date

The amendment applies to supplies made on and after 19 May 2005.