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Base price change key to GST moves

SOME consumers have commented that they are confused when they see 10 per cent GST included on receipts or bills they have received when shopping since July 1.

In fact, the rate of GST is always 10 per cent, but prices won’t always change by 10 per cent.

While you may see on a receipt or bill that you are paying 10 per cent GST, you are no longer paying wholesale sales tax and other embedded taxes on many goods, so a 10 per cent rate of GST does not mean a 10 per cent price rise.

The base price may have changed under the New Tax System, so price changes will vary and the GST of 10 per cent is then added to goods and services where it applies.

The package of tax changes means that many prices will fall, some will stay the same and others will rise, but not by as much as 10 per cent.

Businesses cannot simply add 10 per cent to the price of goods and services they sell. All businesses must take full account of the savings they receive as a result of the tax changes.

One of the more difficult issues for small business is calculating the cost savings.

The ACCC has issued a guide called a cost calculator, available from the ACCC website or from the ACCC by post. The guide has been mailed out to many small businesses.

It is also encouraging that consumers have welcomed the ACCC’s Everyday Shopping Guide.

Setting prices above the estimates is not prima facie evidence of unlawful behaviour, but businesses appreciate that if their prices are within the estimates, they are less likely to be investigated.

A key reason for issuing the price estimates is to give consumers information they need about the impact of the tax changes.

An informed, vigilant consumer will help make the market work better.

It is early days, but it is clear that consumers are watching price changes, and most businesses are trying to do the right thing by their customers.

The ACCC has a reasonable approach to honest mistakes.

However, honest mistakes can do harm which must be corrected. A blind eye cannot be turned to the effect on consumers and time is usually the priority.

Remember, the base price may have changed under the New Tax System so price changes will vary at this point before the GST of 10 per cent is added to the goods and services where it applies.

The ACCC is following up all valid complaints to ensure price exploitation does not occur.

If you want to make a complaint or want information about price exploitation ring the ACCC GST Price Line on 1300 302 502 or visit the website at http://gst.accc.gov.au

l Professor Allan Fels is chairman of the Australian Competition and Consumer Commission.

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