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GST in New Zealand is designed to be a broad based system with few exemptions. Exceptions that do exist include rents collected on residential rental properties, donations, precious metals and financial services.
End-users pay this tax on all liable goods and services directly, in that the purchase price of goods and services includes GST.
The existing rate for GST effective from 1 October 2010 is 15%.
GST was introduced by the Fourth Labour Government of New Zealand on 1 October 1986 at a rate of 10% on most goods and services. It replaced existing sales taxes for some goods and services. GST was a part of the economic reforms initiated by Labour Finance Minister Roger Douglas dubbed Rogernomics. GST was introduced in conjunction with compensating changes to personal income tax rates.
Since its introduction it has had two increases, on 1 July 1989 the rate increased to 12.5% and on 1 October 2010 it increased again to 15%.
GST-registered organisations and individuals pay GST only on the difference between GST-liable sales and GST-liable supplies (i.e., they pay GST on the difference between what they sell and what they buy: income less expenditure). This is accomplished by reconciling GST received (through sales) and GST paid (through purchases) at regular periods (typically every two months, with some qualifying companies opting for one-month or six-month periods), then either paying the difference to the Inland Revenue (IRD) if the GST collected on sales is higher or receiving a refund from IRD if the GST paid on purchases is higher.
Businesses exporting goods and services from New Zealand are entitled to "zero-rate" their products: effectively, they charge GST at 0%. This permits the business to claim back the input GST, but the eventual, non-New Zealand based consumer does not pay the tax (businesses that produce GST-exempt supplies are not able to claim back input GST).
Because businesses claim back their input GST, the GST inclusive price is usually irrelevant for business purchasing decisions, other than in relation to cash flow issues. Consequently, wholesalers often state prices exclusive of GST, but must collect the full, GST-inclusive price when they make the sale and account to the IRD for the GST so collected.