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114 GOODS & SERVICES TAX - MAGAZINE [Vol. 1 GST in other countries 2. GST was, for the first time, adopted in France in the year 1954. Earlier, France was having a VAT system. Now GST is levied in nearly 140 countries. In the discussion to follow, the salient aspects of the tax as prevalent in some countries are being mentioned for comparative study : 2.1 AUSTRALIAN GST - Australian GST has been evolved after consideration of models of other countries. It is broadly structured on the New Zealand GST though Australia has taken benefit of the experiences and laws of other countries also. It was introduced by the Australian Federal Government in the year 1999 effective from July 1, 2000. The basic objective of this tax was to broaden the tax base for goods and services. In Australia, the GST is a broad based tax at 10 per cent on most goods and services and is included in the price paid. Registered business units are entitled for tax credit and the burden of the tax ultimately falls on the consumers for goods purchased and services availed of. Most food items like meat, fruits and vegetables are exempt from GST barring items like prepared food, take away food, restaurant meals, confectionery, icecream, snack foods, alcoholic beverages and soft drinks. Educational and health services, eligible child care, exports of goods and services, religious services, non-commercial activities of charitable institutions, cars for use of disabled people and few other goods and services are also not subjected to GST. Some other aspects of Australian GST are :— � The concept of Time of Supply is dealt with through a series of attribution rules that dictate when a GST liability arises. The concept of Place of Supply is achieved through a series of rules that connect various supplies with Australia, thereby making them potentially taxable. � Another unique feature of the Australian legislation is the introduction of the concept of reduced input tax credits. Those that make financial supplies are able to claim reduced credits for certain inputs used to make those supplies. Primarily it is for those services purchased externally that could have been provided in-house. � In drafting the law, the Australian approach was to use language that was as descriptive as possible. For example, instead of labelling supplies of things such as financial supplies as exempt, they are called input taxed supplies. It helped to understand law easily. 2.2 NEW ZEALAND’S GST - New Zealand imposes GST on almost all goods and services at the rate of 12.5 per cent. Taxable goods and services include all types of real and personal properties other than money. Services cover everything other than goods like repair services, doctor’s services, accountant’s services, etc. However, these have to be part of taxable business activity. Such goods and services do not include :— GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 24

2010] GST - THE SCENARIO IN SOME OTHER COUNTRIES 115 � Goods and services supplied by businesses that aren’t registered for GST, and � Exempt supplies such as :— � Letting or renting a dwelling for use as a private home, � Interest received, � Donated goods and services sold by a non-profit body, � Certain financial services. GST is collected on behalf of the Government on goods and services and claimed back for tax paid on purchases and services procured. The difference in GST paid and payable is to be given to the Government. If more is paid than payable, refund can be claimed. Registration for GST is required to be made by entities having turnover exceeding the prescribed limit. It is optional if the turnover is less than the prescribed limit. Salient aspects of New Zealand’s GST could be summarized thus :— (a) End users pay this tax on all taxable goods and services directly, in that it is included in the purchase price of goods and services. (b) GST is charged on virtually all goods and services supplied in New Zealand, except for rental of residential property, financial services such as mortgages, loans and investments, and the sale of a business that is capable of being a going concern. (c) Businesses exporting goods and services from New Zealand are entitled to ‘zero-rate’ their products - effectively, they charge GST at zero per cent. This permits the business to claim back the input GST but the eventual, non-New Zealand based consumers do not pay the tax (businesses that produce GST- exempt supplies are not able to claim back input GST). (d) GST registered organizations only pay GST on the difference between GST-liable sales and GST-liable services (i.e., pay GST on the difference between what they sell and what they buy; income less expenditure). (e) The headline price must always be GST-inclusive in advertising and stores. The only exceptions are for businesses which claim a mainly wholesale client-base. Otherwise, displaying a prominent GST-exclusive price (i.e., larger and more obvious than the GST-inclusive price), is illegal. (f) The New Zealand GST is 20 years old. In its first official review in 1999, the Treasurer and the Minister of Finance characterized it as having ‘proven to be an efficient and relatively problem-free tax to administer’. It is also a key contributor to the Government revenue. In many respects, the design and implementation of this tax is still regarded as international best practice. Its basic design features have remained unchanged, with the major exception being yet another GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 25

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