Registered for GST under the GST Act? Simple question. Simple answer? Unfortunately not quite.
A recent case that went to the Court of Appeal was dismissed and the risk as to GST registration was determined to lie with the Vendor.
By way of brief background, in an Agreement for Sale and Purchase the Vendor noted that it was not registered under the GST Act and would not be so registered at settlement. The purchase price was recorded as GST inclusive and the Purchaser was registered under the GST Act. On this basis, the transaction was not a supply which would be subject to zero-rating.
Following settlement the Purchaser put in a claim with the Inland Revenue Department for a refund of GST.
After enquiry by the Commissioner and receipt of further information, the Commissioner ruled that the Vendor should have been registered under the GST Act and proceeded to register the Vendor for GST with a registration date being backdated to a date earlier than the date of the Agreement for Sale & Purchase.
The Purchaser’s claim for a refund was subsequently disallowed by Inland Revenue. The Purchaser then sued the Vendor for a breach of warranty in the Agreement and was successful.
It pays to ensure you have the right professionals working for you, especially when dealing with legal documentation and Inland Revenue. Whilst the Vendor may not have been registered for GST, if it is determined and ruled by the Commissioner that a person is liable to be registered under the GST Act then they have the power to do so including determining the date of such registration.
Vendors beware – settlement may have taken place with your bank balance looking rather healthy but in some cases this does not mean your obligations are at an end.
If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:
Karen Eason
keason@farry.co.nz
03 477 8870
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.