GST on E-commerce Returns & Refunds
Mastering the rules for Supply Correction Information (SCI), international refunds, and reclaiming tax on returned stock.
Handling returns is part of daily life for e-commerce sellers. However, from a GST perspective, it’s more than just hitting a "refund" button in Shopify or WooCommerce. Since the 1 April 2023 modernization of New Zealand’s tax rules, how you document these changes has become more flexible but no less important.
In this guide, we break down how to handle returns for domestic sales, international exports, and the growing complexity of imported goods refunds.
Terminology Update
What we used to call a Tax Invoice is now Taxable Supply Information (TSI), and a Credit Note is now Supply Correction Information (SCI). You don't have to change the words on your forms, but you must follow the new data rules.
When Must You Issue an SCI?
You are required to provide Supply Correction Information (SCI) to a customer if:
- ✓ You have already provided a TSI (invoice) for the sale.
- ✓ The sale is subsequently cancelled or returned (full refund).
- ✓ The price of the goods changes (partial refund or restocking fee).
- ✓ The GST previously calculated is now incorrect.
Scenario 1: Domestic Returns & Refunds
This is the most common scenario: a New Zealand customer returns an item and receives 100% of their money back. Because you originally charged 15% GST and (likely) already paid it to the IRD, you are now entitled to reclaim that GST.
| Action | GST Treatment |
|---|---|
| Original Sale ($115) | You pay $15 GST to the IRD. |
| Refund Issued ($115) | You claim $15 back as an adjustment in your next GST return. |
| Partial Refund ($50) | You claim 3/23 of the $50 adjustment ($6.52) back. |
The Restocking Fee Trap
If you charge a $20 restocking fee and only refund $80 of a $100 sale, you must account for the GST on the portion you kept. Your SCI must show the specific reduction in GST being credited back to the customer.
Scenario 2: International Export Returns
When you sell an item to a customer in Australia or the USA, you typically charge 0% GST (Zero-rated export). If that item is returned:
- ✓ No GST Reclaim: Since you never charged GST, there is nothing for you to claim back from the IRD.
- ✓ Inventory Record: You must update your records to show the item has returned to your New Zealand stock.
- ✓ Customs Issues: If the item is high-value, you may need to prove to NZ Customs that this is a "returned export" to avoid paying import GST on your own stock.
Scenario 3: Refunds for Imported Goods (LVG)
Since 2019, large offshore platforms (like Amazon, Etsy, or ASOS) collect 15% NZ GST at the checkout for items under $1,000. This is known as the Low-Value Goods (LVG) rule.
If you are a New Zealand consumer returning an item to an offshore seller, the seller is responsible for refunding the GST they collected. The IRD will not refund you directly; you must seek the full GST-inclusive amount from the merchant.
For expensive items where you paid GST to Customs at the border, there is a simplified refund process (effective 2025/2026) allowing you to apply for a GST refund from Customs within 12 months if the goods are returned or destroyed.
Best Practices for Your Records
The IRD requires you to keep records of all sales and adjustments for 7 years. For e-commerce returns, your Supply Correction Information must include:
- The seller's name and GST number.
- The date the correction information is issued.
- A reference to the original TSI (invoice number).
- A description of the adjustment (e.g., "Return of Order #1234").
- The change in the amount of GST.
The E-commerce Return Flow
Frequently Asked Questions
It is the legal requirement for what used to be called a credit or debit note. It must show exactly how much the GST component of a sale has changed.
No. Shipping is a separate service. If you pay a courier to return an item, that courier charges you GST which is an expense. If you are a private consumer, you cannot reclaim it.
If the exchange is for the exact same price, no adjustment is needed for GST. If the new item is more expensive, you issue a new TSI for the difference. If cheaper, you issue an SCI for the difference.
More NZ GST & Tax Tools
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