The 2019 budget has done away with the GST exemption, on supplies made to resource companies, from 1 January 2019. In this write up, we look at the impact this may have on businesses operating in PNG.
Objectives of the amendment
The above amendment is intended to safeguard government revenue from abuse and simplify tax administration. It is believed that the number of GST refund claims will come down drastically.
Who is affected by the change in the law and how?
Broadly, the following categories of businesses are affected-
1. Resource companies that have not entered into a Fiscal Stability Guarantee Agreement with Government of PNG
2. Papua New Guinea business
3. Foreign business
What is the impact on the resource companies?
Resource companies will face an immediate cash flow situation, as they must start paying GST on all their purchases.
Where a resource company has not reached production stage or where they do not make taxable sales, they will be required to make a refund claim to IRC by lodging monthly GST return, along with a prescribed refund form.
It is important to lodge the return and refund claim early, get refund certified and collect the refund cheques. Refer to our separate write up on how to claim GST refund early, https://www.aitc-pro.com/getting-gst-refunds-time/
What is the impact on the Papua New Guinean businesses?
A Papua New Guinea business, which primarily relies on resource companies will now, heave a sigh of relief, as the onus to claim refund is now shifted away. However, it is still important to reconcile the GST refundable as at 31 December 2018 with IRC records and collect outstanding GST refunds. It is also possible to offset the outstanding GST refunds against future tax liabilities.
What is the impact on the Foreign businesses?
A foreign business supplying to resource company in PNG, excepting car supplier, will not have any impact, since the imports by resource company, continue to be exempted. However, where the importer on record is not a resource company, then foreign company will be liable to import GST.
However, we feel that foreign businesses may enjoy pricing advantage over Papua New Guinea businesses, when it comes to bidding for resource company tenders, as their supply enjoy exemption.
Why should you contact us?
At Shishya, we specialize in advising you on GST matters and in obtaining GST refunds. Our consultants are experienced, have solid understanding of process, share excellent working relationship with IRC and are suitably placed, to assist your business in obtaining refunds within acceptable time frames.
Call us at 3202676 /3202677 or, email firstname.lastname@example.org , if you have any query or require any assistance.