Goods and Services Tax (GST) – Time of Supply When Purchasing a Property


The general time of supply rule is set out in section 9(1) of the Goods and Services Act (“the Act”).  This section deems a supply to occur on the earlier of the date of issue of an invoice and the date on which any payment in respect of the supply is received.  There are special time of supply rules for associated persons.

Under the compulsory zero rating rules (CZR), timing is assessed at settlement and the most important matter for the vendor is to decide if CZR applies.

If CZR applies, then GST is imposed at 0%.  However, if CZR does not apply, GST at 15% will be imposed and the vendor will need to be clear on the time of supply for GST purposes.

Where a deposit is paid in respect of the land transaction that is not periodic, the time of supply can be triggered in respect of the whole transaction. This is because section 9(1) refers to ‘any payment’.  The payment of a nominal deposit could therefore potentially trigger an obligation for the supplier to account for GST on the entire value.

For the deposit to trigger the time of supply, the vendor has to beneficially receive the deposit.  It is not enough that it is held by a stakeholder.  Payment is deemed to be received when the stakeholder status is released.

As noted above, for GST purposes the time of supply is generally the earlier of the time when an invoice is issued by the supplier and when any payment is received by the supplier.   An unconditional agreement for sale and purchase does not constitute an invoice from the IRD’s perspective.

The GST accounting basis upon which the vendor and the purchaser are registered may affect the time of supply rules.  There are three types of accounting basis for the purpose of GST:

  • Invoice basis;
  • Payments basis;
  • Hybrid basis.

If a purchaser is registered for GST on a payments basis, he or she will be able to claim input tax 3/23rd of the actual amounts paid in respect of a taxable supply. Under the payments basis tax can only be deducted to the extent that a payment in respect of that supply has been made during the taxable period.

Where the purchaser is registered on an invoice basis, he or she will be able to claim as input tax 3/23rds of the purchase price at the time of supply.  However where the purchaser is claiming a ‘secondhand goods’ input tax deduction the input tax deduction will only be available to the extent that payment is made.  I.e. the secondhand goods deduction follows the cash paid and is attributed on this basis.

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