Section 78(3) of the GST Act 1985

Section 78(3) of the Goods and Services Tax Act 1985 relevantly provides that, where an alteration in the law is made (such as an increase in the rate of GST), any fee, charge or other amount prescribed by or determined pursuant to any Act or regulation in respect of any supply of goods or services shall, unless provision to the contrary is contained in that Act or regulation, be deemed to be modified so as to increase the amount of fee or charge by the amount of tax chargeable.

We have been asked whether the phrase "unless provision to the contrary is contained in that Act or regulation" in section 78(3) is triggered merely by a reference to an amount being "GST inclusive".

An item in Public Information Bulletin No. 181 (June 1989), stated that where an Act or regulation provides that a fee or charge is inclusive of GST, section 78(3) will not apply to allow the relevant Department to increase that amount to take into account the increase in the rate of GST. Such a provision was considered to be a contrary provision for the purposes of section 78(3).

The Commissioner now considers that the above statement is incorrect. For section 78(3) to not apply when the GST rate increases from 1 October 2010, there must be an explicit statement in the Act or regulation that the amount charged must not be increased by the change in the GST rate. It is not sufficient that the amount is stated to be "GST inclusive". If there is no contrary provision in the Act or regulation, the relevant Department will be able to increase the amount to take into account the change in the GST rate effective from 1 October 2010.