Edited version of private advice

Authorisation Number: 1051641169787

Date of advice: 3 April 2020

Ruling

Subject: GST and refunds

Question

Are you entitled under Division 142 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)to a refund of excess GST paid to the ATO as a result of historically treating the supply of you product and services as fully taxable for GST purposes?

Answer

No

The scheme commences on:

The date of issue of this private ruling

Relevant facts and circumstances

You are an entity that makes mixed supplies with a non-taxable part.

You had been treating some of your supplies as fully taxable.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-75

A New Tax System (Goods and Services Tax) Act 1999 Section 142-10

A New Tax System (Goods and Services Tax) Act 1999 Section 142-15

Reasons for decision

The object of Division 142 of the GST Act is to ensure that excess GST is not refunded if this would give an entity a windfall gain. Generally, Division 142 of the GST Act operates so that a supplier is not entitled to a refund of an amount of excess GST where the supplier has passed on the GST to another entity (the recipient) and has not reimbursed that other entity for the passed-on GST.

Is there an amount of excess GST?

Paragraph 12 of Goods and Services Tax Ruling GSTR 2015/1 Goods and services tax: the meaning of the terms 'passed on' and 'reimburse' for the purposes of Division 142 of the GST Act provides:

'Excess GST' is an amount of GST that has been taken into account in an entity's assessed net amount and is in excess of what was payable by the entity in the relevant tax period prior to taking into account or applying the provisions of Division 142.

In your case, there is an amount of excess GST. The excess GST resulted from the inclusion of an amount of GST in your assessed net amount for supplies that were mixed supplies.

When is excess GST passed on?

Paragraphs 23 to 33 of GSTR 2015/1 provide the view of the Commissioner as to when excess GST has been passed on.

Paragraph 23 of GSTR 2015/1 states that whether the excess GST has been passed on is a question of fact and must be determined on a case by case basis taking into account the particular circumstances of each case. However, section 142-25, and the policy and scheme of the GST Act more generally, give rise to an expectation that the excess GST will be passed on in most cases.

Expectation that excess GST has been passed on

Paragraphs 24 to 27 of GSTR 2015/1 explain the GST Act envisages that the supplier 'passes on' the GST to the recipient of the supply and this simply reflects the design of the GST as an indirect tax which is generally expected to be passed on to the customer when a supply is treated as a taxable supply. If excess GST is included on a tax invoice, this is prima facie evidence that the excess GST has been passed on. While there is a general expectation that, in ordinary circumstances, excess GST has been passed on, the particular facts and circumstances of an individual case may demonstrate that excess GST has not in fact been passed on.

Matters relevant to determining whether GST has been passed on

In paragraph 28 of GSTR 2015/1 the Commissioner considers that the matters relevant to whether GST has been passed on include:

·         the manner in which the excess GST arose

·         the supplier's pricing policy and practice

·         the documentary evidence surrounding the transaction, and

·         any other relevant circumstances.

In your case we consider, based on the circumstances set out in the facts that the excess GST has been passed on by you.

As there is excess GST and it has been passed on, under section 142-10 of the GST Act the excess GST is treated as having always been payable on a taxable supply until you reimburse the other party for the passed-on GST.