Prepare for GST changes now

GST changes appear to be a given and people need to start preparing their clients for it now, says PricewaterhouseCoopers.

In particular, the clients need to be prepared for the fact that the Inland Revenue Department (IRD) is going to be taking a greater interest in GST returns, says PricewaterhouseCoopers (PWCs) GST partner Eugen Trombitas.

He says although the government has not confirmed it is going to raise GST to 15%, it is extremely likely it will be included in the May 20 Budget.

"An increase in the GST rate raises the stakes for GST compliance issues," he says.

"More than ever businesses will need to be comfortable that their GST processes and controls are robust and can withstand Inland Revenue scrutiny."

The IRD's scrutiny is likely to increase in the GST area, because of the shift in emphasis towards collecting tax via GST.

"The GST stakes are going up. Every business will need to think about this."

But there are also transitional issues.

The most likely implementation date is 1 October and this will, for some taxpayers, mean two GST forms will have to be filled in for their return period.

Firms will also have to look at the timing of supply contracts they enter into, if these cover the period of the transition from one rate to another.

"There are provisions within the GST act which cover transition periods and people will need to look closely at how those apply to them."

Accountants will also have to double check how any change applies on their accounting software, he says.

Changing the default GST figure in a system could alter not only future transactions but inadvertently alter previous ones in the same financial year.

"That could cause problems with reconciliations, particularly where the reporting period is not a calendar month - e.g. a four-five-four cycle, and a rate change applies from a calendar month.

"One way to prevent this from happening would be to add a new GST code or rate to the system. However, some less sophisticated accounting systems may only allow one rate of GST to be used at any one time."

Accounts Payable systems will need to be able to operate two different GST rate codes simultaneously given invoices with old and new rates will be processed for some time after any rate change, he says.

"The key message is, you need to be working this out now."

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