Buyers using their keyboards to shop overseas will soon be hit with GST.

The days of buying tax-free bargains overseas are numbered.



Buyers are set to pay GST on online services bought overseas such as iTunes and Netflix, possibly as soon as Christmas.



But a parallel move to charge GST on imported goods, such as clothes, is likely to take longer to put in place.



They are currently exempt if they cost less than $400.



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Prime Minister John Key on Monday said no decision had yet been made, but a discussion document on the changes would be issued by Wednesday.

However, he saw no reason why GST should not be added to online services, which are currently exempt. That was relatively straightforward because larger sellers could register and apply New Zealand's tax laws.

iTunes likely to be among the first hit by new GST rules on foreign purchases

"We're 100 per cent confident ... that we can deliver the services component. That's relatively easy to do. It sits in the invisible world - it's a service."

But for sellers of goods to New Zealanders it was not so simple.

He said he could fully understand why people wanted to shop online overseas, but the move would level the playing field for local retailers who had invested in "bricks and mortar" and supported local jobs but had to charge GST.

It would also plug an estimated $180 million hole in the Government's revenues. That was set to grow rapidly as online buying increased, and would eventually amount to "hundreds and hundreds of millions a year", Key said.

"I think you should have to pay for online services, and 12 jurisdictions do that around the world including Europe so it's a well-trodden path."

"In principle, if you buy SkyTV in New Zealand you pay GST for the Sky services that you get. Why shouldn't you pay if you take services from offshore?"

Key said GST on the importation of goods was "a more complicated nut to crack" and he did not think the exemption would disappear - an option being discussed in Australia which currently has a very high exemption set at $A1000 but where a new level of $A20 or even zero has been floated.

He said he would be surprised if the NZ GST exemption dropped to zero.

He expected a relatively quick move on services, perhaps before Christmas, but GST on the purchase of goods overseas was more challenging and would take longer to put in place.

If the Government set the exemption at zero everything would get held up at the border.

"That's a massive inconvenience to consumers. There's got to be an easier way through. I think there is an easier way through we just have to work our way through it."

One option would be for the website to recognise you were a New Zealand purchaser and add the GST. That way the GST was already paid and the goods would not be held up at the border.

"It get more tricky when the small surf shop in LA has a website and you want go and buy a t-shirt from them and they're not in a big system."

The United States has a zero threshold and Canada has a threshold of $20.