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Inland Revenue

Tax Policy

GST: Zero-rating of tooling costs

(Clause 78)

Summary of proposed amendment

A new zero-rating rule is proposed that will allow GST-registered manufacturers to zero-rate the supply of certain tooling costs charged to a non-resident customer.

Application date

Given it is seen as part of a broader package of neutrality changes, this amendment also applies from 1 April 2014.

Key features

The tools must be:

  • supplied to a non-resident that is not registered; and
  • used solely to manufacture exported goods. The rule will not be available for tools supplied to a non-resident when the goods produced will be used for both the domestic and export markets.


The proposed rule is part of increasing business-to-business neutrality (the bulk of these changes are set out above in the proposals to allow non-resident businesses to register for GST).

As the tooling costs are related to the broader export of goods, there are sound policy reasons for effectively treating these costs are part of the export. This is consistent with the rule in section 11A(1)(m) that zero-rates services provided directly in connection with exported goods.

The proposed rule also imports language used in Australian and European legislation, bringing New Zealand into line with international norms around the charging of tooling costs to non-residents.