GST Price Effects
All businesses are currently evaluating their businesses to determine the effects of the GST on their pricing structure. For some businesses this is reasonably straightforward, as the goods and services they supply are well documented. The effects of the loss of sales tax has been calculated and a recommended level of price alterations made.This process is more difficult for us to carry out as our services encompass such a large variation that is not covered in most general business categories. The tax office publishes a calculation tool to enter in costs of the business to get an indication of the GST effects. The result depends on where certain services are categorised. Our result showed that our costs should decrease by 0.05 to 1 percent. We have decided to reduce our prices by 1 per cent in line with the upper end of the loss of sales tax effect. This will mean a saving to our commercial clients of 1 percent and a GST increase effect for non-commercial clients of 9 percent.
It will be interesting to see the effects on pricing of input supplies to the Dairy Industry after 1st July. Those inputs with transport as a major part of their cost will need to be assessed particularly closely. Offices supplies will be reduced in cost quite significantly resulting in an effect on administration backup services to some degree, estimated at about 1.3 percent.
In general prices to the Dairy industry will not alter remarkably due to the GST. Other forces such as supply and demand of feed inputs, labour inputs and world feed and fertiliser prices will be the continuing major influences on farm profitability.
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