GST and long-term non-reviewable contracts

Terms we use When we say: GST credit, we mean the GST term input tax credit   supplier, we mean the entity making supplies under a long-term non-reviewable contract   recipient, we mean the entity receiving supplies under a long-term non-reviewable contract.

When GST was introduced on 1 July 2000, the GST transitional provisions allowed supplies made under some pre-8 July 1999 contracts to be GST-free until 30 June 2005 (or an earlier 'review opportunity').

In February 2005, the GST law was amended to facilitate suppliers and recipients revising the price of their long-term non-reviewable contracts to take account of the supplies becoming taxable from 1 July 2005.

Between 22 February 2005 and 30 June 2005, a variation to a long-term non-reviewable contract that only revises the price for supplies to be made on or after 1 July 2005 will not affect the GST-free treatment of the contract before 1 July 2005.

If a supplier and a recipient cannot agree on a revised price, the GST law allows for an arbitration process. Under that process, an independent assessor is appointed to work out an appropriate revised price. If the recipient does not agree with the arbitrated offer, the recipient is required to pay the GST instead of the supplier. However, if the arbitration process continues beyond 1 July 2005, the supplier will remain liable for the GST on any taxable supplies that are made before the recipient's GST liability starts.