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Edited version of private ruling
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Ruling
Subject: Input Tax Credit
QUESTIONS:
1. Have you made a creditable acquisition?
2. If so, can you treat the documents you have in your possession as tax invoices to claim input tax credit?
ANSWERS:
1. No. You have not made a creditable acquisition.
2. As you have not made a creditable acquisition, you cannot claim input tax credit.
FACTS:
· You are a company registered for the goods and services tax (GST).
· You are carrying on an enterprise in the building industry.
· You accepted a quotation from a supplier of building materials to supply you with building materials.
· The building materials were solely for use in your enterprise (that is, for a creditable purpose).
· The supplier, a company, is registered for the GST.
· You made payment for the goods to the supplier by bank transfer.
· The supplier issued a receipt for the payments made in the personal names of your director (the director of the company) and his spouse.
· You asked the supplier to issue a tax invoice in your name to enable you to claim input tax credits.
· The supplier did not comply with this request.
· Further, the supplier did not supply the goods for which you made the payment.
· You asked the supplier either to refund the money or supply the goods, but you were told that the responsible persons for the supplier company have left the country.
· Subsequently the company (the supplier) was placed into receivership and liquidators took over the company's business.
· You requested the liquidator to issue you with a tax invoice but the liquidator also did not comply with your request.
REASONS FOR THE DECISION:
To claim input tax credit you must make a creditable acquisition.
Section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:
You are entitled to the input tax credit for any *creditable acquisition that you make.
(The term marked with an asterisk is defined in section 195-1 of the GST Act.)
Section 11-5 of the GST Act states that you make a creditable acquisition if:
(a) you acquire anything solely or partly for a creditable purpose, and
(b) the supply of the thing to you is a taxable supply, and
(c) you provide, or are liable to provide, consideration for the supply, and
(d) you are registered or required to be registered.
For an acquisition to be creditable all of the four conditions above must be satisfied. In your case, you are registered for the GST. Therefore, you satisfy paragraph (d).
You made a payment to a supplier to acquire building components that were required for your enterprise in the building construction industry. Therefore, it remains to determine whether, in your intended transaction with the company for the supply of the building materials, the other conditions in paragraphs (a), (b) and (c) were also satisfied.
Paragraph (b) requires that a taxable supply was made to you. For a taxable supply to take place there must be a supply. Paragraph 9-10(2)(a) of the GST Act states that the meaning of the term "supply" includes the supply of goods. A supply of building materials, therefore, would be a supply of goods.
It is necessary, in this case, to determine whether a supply in fact was made. Goods and Services Tax Ruling GSTR 2006/9 (GSTR 2006/9) examines the meaning of "supply" in the context of the GST Act. Paragraph 10 of the GSTR 2006/9 states,
"….Generally, GST is payable on the value added at each stage of the commercial chain of dealings with goods, services and other things. The GST Act describes these dealings as 'supplies'. In the absence of a supply (or importation) GST cannot arise….."
Further, paragraph 92 of the GSTR 2006/9 states,
"The fact that 'supply' requires something to be passed from one entity to another is largely self-evident in a transaction based tax…."
Even though you made a payment to a company for the supply of building material, that company never supplied those goods. Therefore, in the context of the GST Act, no supply was made to you. As such, you made no acquisition either.
As no supply was made to you (and therefore not having made an acquisition), paragraphs (a), (b) and (c) of section 11-5 of the GST Act have not been satisfied. Consequently, you have not made a creditable acquisition.
As shown above, you have not made a creditable acquisition, you do not have an entitlement to an input tax credit. With no entitlement to an input tax credit, the issue of using the documents you have in your possession to be considered as tax invoices do not arise.