Inland Revenue recognises that modern business practices have evolved. The use of digital accounting systems has evolved. This makes the retrieval of GST taxable supply information easier. Gone are the days when people had filing cabinets full of tax invoices and retrieving information was a day long mission. The global advent of e-invoicing has allowed a change in the supply information rules too.
The Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Act 2022 and the Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill No. 2, both make sweeping changes to the GST regime. Most of the provisions make the GST rules more complex, but the changes relating to invoicing requirements make life easier for GST registered taxpayers.
New sections 19E to 19Q of the GST Act 1985 creates new rules and replaces the current tax invoicing rules. The GST changes outlined below were enacted on 30 March 2022 with a delayed implementation date of 1 April 2023. They are subject to the remedial changes in the September bill, but these are expected to pass before the new rules kick off.It is important to note that the changes should not practically affect most GST registered businesses. They can continue issuing their tax invoices and GST credit notes without making any changes to their systems and should still comply. The new rules allow a wider range of invoicing practices to be adopted (like e-invoicing systems).
We need to understand the new terminologies. Three new important concepts have been introduced under the new rules:
- “Taxable Supply Information” (TSI will replace tax invoices).
- “Supply Correction Information” (SCI will replace credit notes or debit notes).
- “Supply Information” refers to the list of information required in certain situations when the supply is not subject to GST.
Taxable supply information from 1 April 2023
A “tax invoice” is no longer required to support GST claims. Freedom to choose the format that best suits a GST registered person is the hallmark of the new framework. There is no requirement to identify the information as “taxable supply information” in any document or include these words in the information you provide as part of the TSI. Similarly, to claim GST on a payment you make to a supplier, all that is required from the supplier is a list of information relating to the transaction, rather than a document called “tax invoice”.
A list of information in an email, electronic invoice, or an exchange of data with a customer or supplier via an e-invoicing system will all meet the requirements for TSI.
No TSI is required if the customer is not registered for GST, or the amount charged is under $200 (including GST).
Debit notes and credit notes from 1 April 2023
Debit notes or credit notes can continue to be issued but GST registered persons will need check that they meet additional requirements set out under the new framework. Changes to credit note and debit note templates may be needed to include information identifying the TSI (i.e. the tax invoices to which the credit or debit note relate). The best practice is to include the original invoice number. If this is not practicable, including other information which can identify the original tax invoice or TSI is advisable.
Instead of issuing a document called “credit note” or “debit note”, all that is required is the provision of the required information to the customer. No SCI is required if the error in the TSI has no GST impact.
Where a GST group is used, the GST group member can continue to issue tax invoices (or provide TSI) under their own name and registration number. Alternatively, the tax invoices or TSI can be provided under the name and registration number of the GST group representative. The tax invoices or TSI can also be issued under another group entity’s name, who is not the GST representative, or the member making the supply, but notification to the IRD may be required.
Buyer created invoices
Finally, there will no longer be a requirement to obtain IRD’s approval to issue buyer created invoices (BCTI). Instead, all that is needed is to ensure the correct contractual documentation is in place allowing the issuing of BCTI. BCTI is still required to be kept for supporting GST input tax claims and must have all the requisite supply information on record.
It may sound complicated, but it is actually simplification. Wolters Kluwer has more detailed information to assist you.