GOODS & SERVICES TAX
WHAT IS A GOODS AND SERVICES TAX?
A Goods and Services Tax or GST is a tax, which is imposed on the sale of goods and services in Papua New Guinea or the importation of goods into Papua New Guinea. GST is imposed at a rate of 10% of the value of the goods and services sold (or goods imported).
Three Steps to Understanding GST
- Step 1) A GST registered business (eg. a retailer) purchasing goods and services for the business will pay the supplier of those goods GST of 10% (if the supplier is registered for GST). The supplier will issue a Tax Invoice.
- Step 2) The purchaser adds his mark-up (profit) to those goods. Because GST paid on the purchase of goods can be claimed back as a credit, the selling price of a product is based on the GST exclusive price paid for that product.
- Step 3) When the final selling price has been worked out, GST of 10% will be added to that figure.
Businesses which sell goods or services collect GST and pay it to the Internal Revenue Commission less the credit on the GST the business was charged on purchasing its supplies. This is done using a monthly GST return.
GST is not like Income Tax or Salary and Wages tax where tax is calculated on earnings. GST is a consumption tax that is ADDED to the selling price (including profit) of goods and services.