A consumer watchdog group says major retailers should concentrate on improving services instead of applying GST to goods bought from overseas-based websites.

Choice campaign director Christopher Zinn told the Sydney Morning Herald that shoppers should not suffer when big businesses are failing to adapt to their needs. "The big chains should recognize that it's their high prices, limited range and poor customer service that increasingly encourages people to use the internet," Zinn said. ''Consumers are simply chasing the best deal and the best service - and often these days that is found online.''

Retailers Myer, David Jones, Borders and Harvey Norman are calling for the tax due to dropping sales figures as more Australians opt to buy online. Currently, goods bought from overseas online retailers worth less than US$1,000 are not subject to GST. Retailers want the GST exemption cut out completely on extended products costing less than US$1000; saying that job losses could follow if the government refuses to act on the matter.

Australia’s Board of Taxation says the cost of applying the GST on online goods will be higher than the perceived benefit.

Australian Retailers Association executive director Russell Zimmerman added that major companies have been slow in adopting to the internet compared to small retailers that make use of social networking sites like Facebook and Twitter to sell their goods.

''Small retailers are getting very savvy,'' he said. ''Retailers are going to need to look at various forms of retailing to engage with their customers.''