GST and the retailer: new responsibilities

Press, 23 April 1986, Page 37

GST and the retailer: new responsibilities

GOODS& services™

by

Derek Allan

Almost all retailers will be liable to register for GST and will have certain new liabilities and responsibilities. In particular, we will examine the problem areas for retailers of equipment and accounting records, the various types of sales such as gift vouchers, lay-by sales, tokens, or routine sales, goods for own use, goods returned or damaged, and the pricing requirements for retailers.

Question.—Will retailers need new equipment designed to handle GST?

Answer.—Retailers will not need to buy any new cash registers or any other equipment because of GST. They may, however, choose to update old equipment if they wish, and if so it will be desirable to buy registers capable of product analysis that should include GST analysis. Question.— What accounting records must a retailer keep?

Answer.— Most retailers will keep some form of day-book or inwards cash-book detailing all daily takings. An extra column should be added to that book, headed GST, and one-eleventh of the total sales received from taxable activities recorded in that day book as output tax. Similarly, an extra column should be main-

tained in the outwards cash-book headed GST. With each cheque drawn the GST content should be analysed into the GST column. Where cheques are drawn for exempt items, e.g. wages, the analysis is transferred direct to the wages column with no amount appearing in the GST column.

Where a retailer is operating on a cash basis when completing his GST returns he would simply

This is the sixth in a series of weekly articles on GST prepared by Mr Derek Allan, of Lawrence Anderson Buddle, chartered accountants.

total the GST column of his inwards cash and account for that total in the return period as output tax. He would total the outwards cash GST column and show that as input tax paid for the period. The difference is then returned to the department at each return period. If the retailer is operating on an invoice basis he will have to make an adjustment at the end of the return period. He will add the GST on his creditors owing at the end of the period and deduct the GST on the creditors owing at the beginning of the period. The adjusted amount is then shown as the input tax for the period under the invoice r basis. A similar adjustment is made to the output tax total when allowing for debtors outstanding at the beginning and end of the period. It is a relatively simple adjustment, but does require the scheduling of ■ all debtors and creditors at the end of each return period.

Question.— What about invoicing? Does a retailer have to issue a tax invoice to all customers? Answer.— No, an unregistered person, that is a member of the public, cannot demand a tax in-

voice. Therefore, in most instances the present trading operation of the retailer will carry on. It is only where the client is a registered person that he will require a tax invoice. When dealing with a registered person no tax invoice is required for sales of less than $2O. If the amount of the sale is over $lOO the tax invoice must show the words, “tax invoice,” the supplier’s GST registration number, the name and address of the supplier, and the purchaser, the date of the invoice, the description of the goods or services supplied, the quantity or volume of the goods supplied, the serialised number of the invoice and either the GST inclusive price and a statement that it includes a charge for the tax or the price excluding the tax plus the amount of the GST and the price including GST. The retailer must ensure that he keeps tax invoices to support ail claims for input credits on goods and services over $2O that they buy themselves. However, the tax invoices do not need to be sent to the Inland Revenue Department. Question.— Does the retailer when pricing articles have to show the GST on the article? Answer.— It is not necessary to show the GST separately on each article, and we recommend that one price inclusive of GST be shown.

Question.— If I buy goods on lay-by with the original payment before October 1, but the final payment after October 1,

must I pay GST? Answer.— GST must be paid in the return period when the goods are delivered or uplifted. Therefore, if the goods are not delivered until after October 1, GST is payable on the total purchase price. Question.— If I buy a gift voucher must I pay GST?

Answer.— Where a gift voucher has the money

value shown on it GST is payable only when the voucher is exchanged for goods. Therefore, for normal record or book token sales no GST is payable when the voucher is purchased. Where the voucher does not have money included thereon, e.g. for milk tokens, GST is charged at the time the tokens are purchased. Postage stamps and bus concession tickets will also be treated in this way, that is, GST charged at time of purchase. Question.— Where discounts are given for prompt payment is GST charged on the total sale value or the net price?

Answer.— GST would be charged on the invoice

on the gross amount. If the discount is taken for prompt payment the retailer must then give a credit based upon the gross sale value inclusive of GST. For example, if 10 metres of carpet is sold for $lOOO plus GST $lOO, total value $llOO. If a 2 per cent discount is provided for payment within seven days a discount of $22 would be given and the net GST accounted for by the retailer would be $9B. If the two transactions occur in different return periods, $lOO would be accounted for as output tax in the first return and a credit of $2 claimed from the output tax in the next return. With trade discounts, however, the full discount is shown on the invoice and GST charged in the original sale on the net price only.

Question.— Are hirepurchase agreements subject to GST?

Answer.— Yes. The sale under hire-purchase is subject to GST at the time the hire-purchase agreement is entered into. GST is calculated only on a cash price of the goods, and is accountable in the period when the purchase agreement is signed. Subsequent payments under the hire-purchase repayment are not subject to GST. Where a retailer having negotiated a sale to a customer sells the goods to a finance company who then arranges the hire-purchase the retailer will charge the finance company the full price, including GST. The finance company is then entitled to input credit for

the GST charged by the retailer. There is then a second sale from the finance company to the customer and the finance company will account for GST on the sale as output tax based upon the cash price of the goods.

Question.— Can a retailer claim a credit for sales tax paid for all trading stock and stationery held at September 30, 1986?

Answer.— A credit is obtainable for the sales tax paid on all stationery and most trading stock. A credit will not, however, be given for sales tax on capital assets, hired goods, second-hand goods, or goods still subject to sales tax on October 1, 1986. Those goods still subject to sales tax will include tobacco, alcohol, motor-vehicles,. motorspirits duty, and a number of other items. The claim for sales-tax credit allowable must be made in any one return before March 31, 1987. It will, therefore, be necessary for the retailer to take stock of all these items at September 30 and to be able to produce the stock sheets and invoices relating to those purchases at any time.

Question.— Are goods hired out subject to GST? Answer.— GST will apply to items hired out, and is payable with each periodic payment.

Readers with questions should write to: GST Column, Business Department, “The Press,” P.O. Box 1005, Christchurch.