As "GST-Day" gets closer and closer, businesses are examining their pre- and post-GST pricing strategies. Legislative complexity and sheer product volumes mean that retailers are finding this area most difficult and often turning to their reseller to provide a simpler technology-based solution.
Some businesses have it easy when it comes to GST price determination and can just add 10 per cent to current selling prices. Who are these lucky organisations? The first group is anyone registered for sales tax (they had to get a benefit somewhere!), since all their trading stock is purchased ex-tax. Assuming that purchase prices remain constant, they can maintain their current margins and just add 10 per cent GST to selling prices. If purchase prices fall, then they are required by the ACCC to pass these savings on to their customers, but very few businesses can predict these potential price falls in advance of July 1.
The second group is enterprises whose products or services currently have no sales tax component at all (like software developers, for example). Most service businesses fall into this category. While it is required that cost savings through GST are passed on to customers, where almost all of the cost is labour-related (as in the software industry) inclusive selling prices are liable to rise by the full 10 per cent.
The organisations with some major number-crunching to do are the retailers who are not registered for WST (which is most of them). They need to determine what the net cost of all items held for resale will be after June 30, remembering that on that day you calculate the total WST contained in stock for resale and claim it back from the ATO.
Then you need to apply your standard mark-up to the reduced cost to determine the ex-GST selling price, and add the 10 per cent to arrive at the inclusive selling price. For retailers, just adding 10 per cent will land you in hot water with the ACCC, since they have ruled that you "may not make a profit from GST". Asked for clarity on whether the "standard mark-up" referred to a dollar addition or a percentage, the ruling is that percentage margins must stay the same. This means that actual dollar profits will be lower, on the same transaction, after GST.
Having determined all these prices, the retailer would then have to re-mark all goods with the new prices on Friday night, June 30! Given the impossible nature of this task, a system of dual price labels has been approved where goods can be marked with both the pre-GST and post-GST price, and the retailer has a two-week period in which to remove pre-GST pricing from all items on shelves. A good tip is to use a differently coloured label to show post-GST prices, since it up to the retailer to ensure that customers understand the dual price system.
Technology is there to make your life easier. Many retailers have used the administrative cost associated with the above to justify purchasing barcode labelling and scanning systems prior to July 1. Then all that is required is a simple electronic adjustment to software, and a change of price labels on each shelf, rather than on every single item in the store.
Kevin Lief is md of Pastel Software (www.Pastel.Net.au). Reach him email@example.com.