Papua New Guinea
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UNDERSTANDING GST FOR SMES IN PNG

Last week I shared a post on GST on social media and received lots of feedback on it from readers saying they wanted to know more.

GST, short for Goods and Services Tax, is an essential aspect of business in Papua New Guinea. It’s an added charge on most items and services.

This tax provides revenue to the government, funding various public services. The Internal Revenue Commission (IRC) is responsible for tax collection in PNG.

Understanding GST:
GST is a 10 per cent tax added to the price of most products and services.

If you’re selling a product for K100, with GST, it becomes K110, with K10 being the GST.

Importance of GST:
GST simplifies the tax landscape. Rather than juggling multiple taxes, businesses deal mainly with this one, streamlining tax management.

Key GST Responsibilities for Businesses:
Registration: Large businesses must register for GST.

Smaller businesses can choose to, and sometimes there are advantages in doing so.

Adding GST to Sales: After registration, all sales must include the GST charge.

Receipts should clearly specify the GST amount.

Reporting to the Government:

On the 21st of every month, you need to report to the IRC how much GST you’ve collected and the GST paid on business-related expenses for the previous month.

Detailed Record Keeping:

Maintain thorough records of all transactions, especially those involving GST.

GST Debits and Credits:

When you collect GST from customers, it’s considered a “GST debit.” When you pay GST on business expenses, it’s a “GST credit.”

For instance: If you sold items totaling K1000, you’d have collected K100 in GST (10 per cent of K1000). This K100 is your GST debit.

If you spent K500 on business supplies that included GST, you’d have paid K50 in GST. This K50 is your GST credit.

Claiming GST Credits:

If you’ve paid GST on business items or services, you can claim these as GST credits, effectively getting that money back.

For the example above, if you collected K100 (debit) but spent K50 (credit) on GST, you only send K50 to the government, the difference between them.

Additional Advice:

Professional Assistance: Especially when starting, get advice on GST.
Proper understanding is vital for both legal and financial reasons.

Finally, while GST might seem challenging initially, understanding its ins and outs is invaluable.

Properly managing GST can ensure you operate within the law, provide necessary funds for public services, and even benefit your business’s bottom line.

It’s a fundamental aspect of doing business in Papua New Guinea, one that, when handled correctly, can lead to smoother business operations.

More information can be found on https://irc.gov.pg/pages/taxes/businesses-and-employers/goods-services-tax

Des Yaninen is President of the PNG MSME Council and has been an outstpoken advocate for SME development in PNG for over a decade.

He is CEO of Pacifund, a financial services firm that helps SMEs secure bank loans or investment funding. Contact him on email des@pacifund.com.