Goods and Services Tax (GST) is an essential part of New Zealand’s tax system, applied to most goods and services sold in the country. Understanding the GST rates for goods vs services is crucial for businesses, freelancers, and consumers to ensure compliance, accurate invoicing, and proper GST filing.
In New Zealand, the standard GST rate is 15%, but its application can vary depending on whether you are dealing with goods, services, or specific exemptions. This guide will break down everything you need to know.
What Is GST in New Zealand?
GST, or Goods and Services Tax, is a value-added tax applied to most purchases and business transactions in New Zealand. Businesses that meet the registration threshold must charge GST on taxable sales and can claim GST paid on business expenses.
Standard GST Rate: 15%
The standard GST rate in New Zealand is 15%. This applies to the majority of goods and services, including:
- Retail goods (clothing, electronics, groceries, excluding exempt items)
- Services like consulting, web design, and professional fees
- Imported goods and digital services
The rate is applied on the GST-exclusive price to calculate the total amount a customer must pay. Businesses can use a GST Calculator to easily calculate GST-inclusive and GST-exclusive amounts for both goods and services.
GST on Goods vs Services: Key Differences
While the standard 15% rate applies to both goods and services, there are important differences in how GST is applied, invoiced, and sometimes exempted:
1. GST on Goods
Goods are tangible items like furniture, clothing, electronics, and groceries. Businesses selling goods must:
- Add 15% GST to the sale price if registered
- Issue GST-compliant invoices
- Include GST when filing returns
Example:
A chair costs NZD 200 (GST exclusive).
GST = 200 × 0.15 = NZD 30
Total price = 200 + 30 = NZD 230
2. GST on Services
Services include work performed for clients, such as consulting, cleaning, or digital services. Services are generally taxed the same 15% rate as goods but invoicing practices may vary depending on whether the service is:
- Domestic (within New Zealand) – GST applies
- Exported (outside NZ) – Usually zero-rated
Example:
A website development project costs NZD 1,000 (GST exclusive).
GST = 1,000 × 0.15 = NZD 150
Invoice total = 1,000 + 150 = NZD 1,150
Tip: Use a GST Calculator for services invoices to avoid manual calculation errors.
Zero-Rated Goods and Services
Some goods and services in New Zealand are zero-rated, meaning GST is 0%, but the business can still claim input GST. Common examples include:
- Exports of goods or services
- International transport services
- Certain financial services
Zero-rated items are still considered taxable, but GST is calculated as 0%. This is particularly important for businesses dealing with both domestic and international clients.
GST Exemptions
Certain supplies are fully exempt from GST, meaning GST is not charged, and input GST cannot be claimed. These include:
- Financial services like lending and insurance
- Residential rental income
- Sales of land (in some cases)
Knowing the difference between exempt vs zero-rated is important to avoid errors in GST returns.
How Businesses Should Handle GST for Goods vs Services
- Register for GST in NZ if your turnover exceeds NZD 60,000 per year.
- Separate goods and services in accounting records to ensure accurate reporting.
- Use a GST Calculator to handle complex invoices and mixed sales.
- Check whether items are zero-rated, exempt, or standard-rated.
- File GST returns accurately to IRD on time.
Proper accounting ensures compliance and avoids penalties.
Common GST Calculation Scenarios
| Scenario | GST Exclusive | GST Rate | GST Amount | Total Price (GST Inclusive) |
|---|---|---|---|---|
| Selling goods | $500 | 15% | $75 | $575 |
| Providing services | $1,200 | 15% | $180 | $1,380 |
| Exported services | $2,000 | 0% | $0 | $2,000 |
| Zero-rated goods | $300 | 0% | $0 | $300 |
Using a GST Calculator simplifies these calculations, especially for businesses handling multiple items and service types.
Tips for Accurate GST Compliance
- Always verify whether your goods or services are standard-rated, zero-rated, or exempt.
- Keep detailed invoices and records for each transaction.
- Use digital tools like GST calculators for efficiency.
- Stay updated with IRD guidelines on GST.
Proper GST management ensures accurate reporting, smoother audits, and peace of mind.
Final Thoughts
In New Zealand, the GST rate is straightforward at 15%, but applying it correctly to goods vs services requires attention to details like exemptions, zero-rating, and invoicing.
Businesses and freelancers can save time and avoid errors by:
- Understanding what is GST
- Knowing how to register GST in NZ
- Using a GST Calculator to calculate tax accurately
By mastering these basics, you can confidently manage GST for all your goods and services and maintain compliance with New Zealand tax regulations.