Input tax available for imported goods

(Clauses 136(3) and 141(1))

Summary of proposed amendment

The Goods and Services Tax Act 1985 is to be amended to prevent a registered person from claiming input tax deductions in respect of goods entered for home consumption (imported goods), when they deliver or arrange the delivery of the goods to a person in New Zealand.

Application date

The amendment will apply from 1 April 2011.

Key features

The proposed amendment will prevent a person from claiming input tax deductions in respect of imported goods, when they merely deliver, arrange the delivery or make the delivery of the goods more easily achieved to a person in New Zealand.

Background

The GST Act defines “input tax”, in relation to a registered person, as including GST paid on goods entered for home consumption (imported goods) by the person.

Before the introduction of the new apportionment rules, the definition did not apply to the delivery of goods to a person in New Zealand. This ensured that, for example, a courier firm was not able to claim input tax in respect of imported goods when they merely arranged delivery of the goods in New Zealand.

As a result of the changes to the wording of the definition of “input tax” to accommodate the new apportionment rules, the restriction on the ability to claim input tax has been removed. A registered person could arguably claim input tax deductions in respect of GST paid in the process of delivering the goods to a person in New Zealand.