• 15.1. Is the surcharge part of the consideration for the supply made by the merchant?

    This issue is a public ruling for the purposes of section 105-60 of Schedule 1 to the Taxation Administration Act 1953.

    Yes. The surcharge is considered to form part of the price for the merchant's supply of goods or services to the cardholder. It is a component of the consideration payable in respect of the supply.

    Example 1: Purchase of a shirt- Taxable supply

    Anastasia is in a store and decides to purchase a shirt. The shirt's price tag indicates that the price is $55 (inclusive of GST). There is a sign at the counter indicating that a surcharge of 3% of the price will be imposed if payment is made by credit card.

    Anastasia decides to pay by credit card and the merchant imposes a surcharge of $1.65 in respect of the sale. The price payable in respect of the shirt is now $56.65. As the supply of the shirt is a taxable supply, the GST payable in respect of the sale is $5.15, being 1/11 of the GST inclusive price of $56.65.

    End of example

     

    Example 2: Purchase of fruits and vegetables – GST-free supply

    Ming Ho, a fruit and vegetable retailer, purchases his stock from a wholesaler. In one particular purchase, the price for the fruits and vegetables comes to $1,100. The wholesaler imposes a surcharge of 2% on the price if payment is made by credit card.

    Ming Ho pays by credit card and incurs a surcharge of $22. The price paid in respect of the fruits and vegetables will be $1,122. The supply of the fruits and vegetables is a GST-free supply and GST is not payable in respect of the sale.

    End of example

     

    Example 3: Enrolment in a college course – mixed supply

    Ben enrols in a college course. There are three units in his course – one unit is taxable and the other two units are GST-free. Ben's packaged course is a mixed supply. The college charges $1,000 (inclusive of GST) for the taxable unit, $800 for one of the GST-free units and $700 for the other GST-free unit. The total amount payable by Ben on the Statement of Account issued by the college is $2,500.

    The college imposes a surcharge of 4.5% if payment of the Statement of Account is made by credit card. Ben decides to pay for his course by credit card and the college imposes a surcharge of $112.50. The price payable in respect of the course is now $2.612.50.

    The college apportions 40% of the surcharge, that is, $45 to the taxable unit as its price amounts to 40% of the total course fee. The balance of the surcharge, amounting to $67.50, is apportioned to the GST-free units.

    The price for the taxable supply component of the course is now $1,045. The GST payable in respect of this component is $95, being 1/11 of the GST inclusive price of the taxable component of $1,045.

    End of example
      Last modified: 24 Jun 2015QC 16359