GST exemptions and procedures for reclaiming GST

1240/5(3631)

WRITTEN QUESTION TO THE MINISTER FOR TREASURY AND RESOURCES BY DEPUTY G.C.L. BAUDAINS OF ST CLEMENT

ANSWER TO BE TABLED ON TUESDAY 15th JANUARY 2008

Question

Would the Minister advise members of -

1. the latest list ofGSTexempt items;
2. the procedure that will allow both registered and unregistered traders to reclaim GST already paid on goods which are ultimately sold at a reduced price or are not able to be sold atall (for example perishables or items which are nolonger in fashion);
3. the procedure for reclaiming GST on returned goods which are surplus to requirements, unsaleable, returned underwarrantyand so on;
4. the procedure for payment of GST by non-registered traders when the imported goods are urgently required, and the expected timescale for such procedure.

Answer

1. Supplies that have been excluded from the tax base are listed in the GST Law underSchedule 5 (Exempt) and Schedule 6 (Zero rate) whichwere approved by the States in April 2007. The exclusions were revised by amendments (additions) contained in the GST Regulations which were approved by the States in October 2007. The rangeof exclusions has been debated by the States on four separate occasions (the latest being in November2007). I can forward a copy of the relevantschedules to the Deputy but in brief there are 8 groups of Exemptsuppliesin Schedule 5:-

• Finance services;
• Insurance;
• Postal Services;
• Medical and paramedical supplies;
• Supplies by Charities;
• Child Care;
• Education and Burial and Cremation

an d 5 groups of zero rate supplies in Schedule 6:-

• Dwelling;
• Land;
• Medicines on prescription;
• Exports; and
• International services.

2. Perhaps I should start byreminding the Deputy how GST/VAT systems work.Anybusiness registered for GSTis entitled to reclaimthe tax paid on all expenditure (expenses and goodsfor resale) asinput tax on the quarterly GST return. All goods and assets are in effect held tax free. GSTmustbe charged on the goods when they are suppliedon the valueof the consideration involved (i.e. on the actualsale price if reduced). If they are not sold (e.g. perishablesorsaydestroyedby fire) then noGSTischargeable.The onus will be on thebusiness to provide adequate records to show anywrite off of stock.

What must be borne in mind is that purchases/expenses (GST input tax) and sales (GST output tax) are two separate events in GST/VAT systems.

The non registered GST trader cannot reclaim any GST incurred on purchases/expenses but they do not have to account for GST on any of their sales.

3. The procedure for returned goods underGSTisnot that different to current practice. If any goods are returned to a supplierby either a GST registered ornon registered trader then thesupplier,dependingon their terms and conditions will raise a tax credit note or provide a full refund. In the specificcaseofgoods returned under a warranty then goodssubsequentlyrepairedor replaced are not considered tobe a supply for GSTpurposes(tax is notcharged).
4. A non GST registered trader can still apply to Customs for approved importer status and assuch will be allowed toclear all imported goods under current timescales (whether they are required urgently ornot). They will be allowed to enter goods 10-15daysafterthegoodshave arrived and pay anyGST/duty after a further 15days.

It would only be if a non GST registered trader does not request or obtain approved importer status that they will be expected to enter and pay any GST/duty before the goods are released. Entry and payment can be made electronically in advance of the date of import in which case the goods will be released on arrival.

The procedures for imported goods for both GST registered and non registered traders have been agreed with the Chamber of Commerce to ensure that there should be no delays in the movement of goods into and out of Jersey.