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Ruling

Subject: Entitlement to refund of goods and services tax (GST)

Question 1

Have you overpaid GST for the relevant period, and if so are you entitled to a refund of any such overpaid GST?

Answer

No. You have not overpaid an amount of GST and are therefore not entitled to a refund.

Relevant facts and circumstances

You are registered for GST.

Your ruling request relates to Net Register Shorts transactions in your retail outlets.

Cash shorts and overs refer to shortages or excesses of cash takings. These are the difference between the actual takings at the end of the day and the expected takings based on sales of goods recorded through the point of sale (POS) systems.

Your records are based on the expected amount of cash collected for your sales. Differences occur where there are errors or theft, such that the actual cash takings do not correlate with the POS information.

The differences predominantly arise due to errors by staff in cash handling, and to a lesser extent theft.

Staff errors include:

· taking insufficient (or too much) cash from the customer after the sales transaction has been processed

· incorrect cash being given to the customer where 'cash out' has been requested when debit cards were used for payment.

You are aware of the total net cash over or under on a weekly basis.

You calculate and remit GST on the basis of the sales information. You now consider that where the actual cash received for all transactions is below the sale price for all transactions (due to the errors above) this results in you making an overpayment of GST.

To determine the amount of GST you believe you have overpaid, you have had to use a series of assumptions. You have used the following steps to calculate the amounts you consider you have overpaid:

· Start with the net register short amount

· Take out the percentage of 'cash out only transactions' that occur at the register as these are not a taxable supply to the customer.

· An allowance has been made for the percentage of cash differences as a result of employee theft.

· You then apply the percentage of GST-free and taxable sales across your outlets to the net short amount. You apply this percentage to the shortage amount (to reduce the shortage relating to taxable supplies).

Relevant legislative provisions

Taxation Administration Act (1953)

Section 105-65 of Schedule 1

A New Tax System (Goods and Services Tax) Act 1999

Section 9-5

Section 9-70

Section 9-75

Division 19

Division 21

Reasons for decision

Summary

You have not overpaid an amount of GST and are therefore not entitled to a refund.

Detailed reasoning

Under section 9-5 of the GST Act you make a taxable supply if you make the supply for consideration, the supply is made in the course or furtherance of an enterprise that you carry on, the supply is connected with Australia and you are registered or required to be registered. The supply is not a taxable supply to the extent that it is GST-free or input taxed.

Based on the above reasoning, you make a taxable supply when you sell a product that is not GST-free or input taxed. This is because the supply is for consideration and in the course of your retailing enterprise in Australia and you are registered for GST.

Subdivision 9C of the GST Act determines how much GST is payable on taxable supplies. Specifically, section 9-70 provides that the amount of GST on a taxable supply is 10% of the value of the taxable supply. Section 9-75 advises that the value of a taxable supply is price x 10/11. This section goes on to explain that, so far as the consideration for the supply is consideration expressed as an amount of money - the price is the amount without any discount for the amount of GST (if any) payable on the supply.

Expressed means 'shown, manifested, or revealed' or 'represented by a symbol, character, figure or formula'. In your case the consideration for the transaction is 'expressed' by the price on your shelves and in your register. The amount of money expressed as the price is the relevant price for determining the GST payable, rather than the actual money passing in the transaction.

We also note that payable means the amount owed, to be paid or due.

It is relevant to note that the amount payable may be different to the amount actually paid at the register, for example too much or too little cash may be provided. However, the price for this transaction never changes and the invoice reflects the agreed consideration.

If the customer did not have sufficient cash at the time and you were aware of this you would either lower/discount your price or not allow the sale on those terms. However, this is not the case as you have not arranged a discount for the customer. You have simply collected the wrong amount of cash.

Similarly, if the customer handed over excess cash and was aware of this at the time then they are entitled to be charged the correct amount and have the difference returned to them. You have not increased your price for this customer. This demonstrates that the price is the relevant matter, rather than the cash or consideration that you actually receive.

In your circumstances the price that your customer is required to pay is the price marked on the shelf, the corresponding price entered in your point of sale systems and the tax invoice issued to your customers. Where your cash transactions do not balance at the end of the day this is not because the amounts payable on your supplies have altered. It is because errors have been made in cash handling, and these errors do not affect or alter the price of the supply. It is the price of the supply that is relevant for calculating GST payable.

For these reasons we consider that you have properly accounted for GST based on the prices of your products.

You have therefore not overpaid GST.

As you have not overpaid GST you are not entitled to a refund under general principles. It is therefore not necessary to consider the restriction of refunds provisions in section 105-65 of Schedule 1 to the Taxation Administration Act 1953.

Adjustment events

Division 19 of the GST Act contains provisions regarding adjustment events. Relevantly, an adjustment event includes any event which has the effect of changing the consideration for a supply or acquisition. For example, an adjustment event includes a change to the previously agreed consideration for a supply, whether due to the offer of a discount or otherwise.

GSTR 2000/19 Goods and services tax ruling: making adjustments under Division 19 for adjustment events considers the type of circumstances that result in an adjustment event. An adjustment event occurs where there is a subsequent event that means you paid too much or too little GST. In your circumstances we consider that there is no subsequent event that alters the consideration for your supply. This is emphasised by the fact that you do not know which supplies are subject to an under or overpayment and therefore could be subject to an increasing or decreasing adjustment.

GSTR 2000/19 considers the example of dishonoured cheques (at paragraph 48). When a cheque is not honoured, the consideration for the supply has not changed nor has the supply been cancelled. This is not an adjustment event. We consider that your circumstances are similar to this as the price or consideration for your supply does not change even though you may receive a greater or lesser amount than expected. Therefore you do not have an adjustment event in relation to your supplies.

For the sake of completeness it should also be noted that under Division 21 of the GST Act there are provisions relating to writing off bad debts for taxable supplies. If debts are written off as bad or are outstanding after 12 months adjustments (for the purposes of working out net amounts) may be made. They can arise both for amounts written off or outstanding and for recovery of amounts previously written off or outstanding. However, we consider that this Division does not assist you as you do not have a situation where any particular taxable supply can be identified as resulting in a debt to you.

Therefore you do not have any adjustment events that enable you to make an increasing or a decreasing adjustment. You have properly accounted for GST where you have accounted for GST based on the prices of your products.