PROPOSED legislation could allow suppliers to adjust their prices to recover GST.
The proposed law seeks to amend the GST treatment of so called "grandfathered" contracts after June 30 2005.
It will allow suppliers with long-term, non-reviewable contract to, subject to their customer’s approval, adjust their prices to recover GST.
If the customer does not agree with the proposed price increase and the supplier has complied with a complex and prescribed "arbitration process", the GST liability will be imposed directly on the customer (even if it is not registered for GST).
With July 1 fast approaching, suppliers with long-term, non-reviewable contracts will be relieved to see legislation that has been proposed since May 2000.
However, many suppliers will be disappointed with the complex arbitration process proposed under the law which, coupled with the uncertainty of having any increased determined by an assessor, could force them to accept price increases that do not fully recover their GST liability.
The legislation is also unlikely to be welcomed by financial institutions and unregistered customers.
In those scenarios where price increases cannot be resolved by arbitration, customers will be required to account for the GST on supplies made to them.
For more information contact:
Graham Nagle 9429 7597
Minter Ellison