Edited version of private advice

Authorisation Number: 1052001412908

Date of advice: 1 July 2022

Ruling

Subject: Excess GST

Question 1

Was the excess goods and services tax (GST) in relation to your agent sales in the relevant tax periods 'passed on' within the meaning of section 142-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No.

Question 2

If the answer to Question 1 is No, are you able to amend your activity statements for the relevant periods to be refunded the excess GST paid?

Answer

Yes, you are able to amend your activity statements to be refunded the excess GST paid, if the activity statements are within the period of review as specified in section 155-35 of Schedule 1 to the Taxation Administration Act 1953.

This ruling applies for the following period:

From 1 April 20XX

Relevant facts and circumstances

You were registered for GST during the relevant tax periods, you are not currently registered for GST.

You sell goods on consignment both in store and online through your website.

The consignors set the price of their products and the products are priced when the consignors deliver stock to your shop.

None of your consignors are registered or required to be registered for GST as they are small artesian or hobbyists' businesses.

You have provided examples of contracts you have with the consignors that show:

•         Your commission rate on the sale of the consignor's products

•         Payment arrangements between you and the consignor

•         That you are not responsible for stolen, damaged or faulty stock to the consignor

•         That the consignors have dedicated shop space and must keep their area tidy and stocked

•         That the consignors must supply their own signage and displays (labelled with the consigner's name)

•         A minimum contract period and leave notice period

•         Social media marketing and advertisement requirements by both parties.

You have provided an example of your payment to consignors showing the consignor's recommend retail price minus your set amount of commission as specified in the agreements with the consignors.

When a sale is made by you on behalf of the consignor, the till receipt is in your name along with your ABN declared on the receipt.

You have provided examples of till receipts issued by you to recipients of your consignment sales showing no GST was charged to the recipient.

You have reported GST on your activity statements based on the total amount of the consignor sales (i.e. on a 'sale or return' basis) not based on the amount on your Agent's commission on these sales. This was due to relying on reporting from a third-party accounting software, which was not set up correctly to report your GST liability as an Agent.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 142-1

A New Tax System (Goods and Services Tax) Act 1999 Section 142-5

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

A New Tax System (Goods and Services Tax) Act 1999 Section 142-25

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

Reasons for decision

Question 1

Detailed reasoning

Section 142-1 of the GST Act provides that excess GST is not to be refunded if this would give an entity a windfall gain. Division 142 of the GST Act applies for tax periods starting on or after 31 May 2014 and as such applies to the relevant periods.

Was there excess GST?

Subsection 142-5(1) of the GST Act describes excess GST as:

This Subdivision applies if, after disregarding any amounts covered by subsection (2), your *assessed net amount for a tax period takes into account an amount of GST exceeding that which is payable.

*to find the definition of asterisked terms, see the Dictionary, starting at section 195-1 of the GST Act

Subsection 142-5(2) of the GST Act provides that when working out the amount of excess GST, the following amounts are disregarded:

a)    an amount of GST that is correctly payable and attributable to the tax period, but which later becomes the subject of a decreasing adjustment

b)    an amount of GST that is payable, but is correctly attributable to a different tax period, and

c)    an amount of GST to which section 142-16 (about low value goods - see section 40-730 of the GST Act applies.

In this case, for the purposes of subsection 142-5 of the GST Act, there are no amounts to be disregarded under subsection 142-5(2) of the GST Act.

On the facts provided, you took into account an amount of GST in your assessed net amount for each of the quarterly tax periods in the relevant periods which exceeded that which was payable by incorrectly treating the total sale amount of consignment goods as taxable supplies when those supplies were supplied by you on an agency basis to the recipient on behalf of the consignors (the principal) in which you received an amount of commission agreed between you and the consignor.

Accordingly, that amount of GST incorrectly included in your assessed net amount which exceeded the amount of GST payable constitutes excess GST.

Was the excess GST 'passed on'?

Generally, section 142-10 of the GST Act provides that excess GST has been passed on to another entity

until you reimburse the other entity (the recipient of the of the consignment supply) for the passed-on GST.

The Commissioner's view on when excess GST has been passed on or been reimbursed is outlined in Goods and Services Tax Ruling GSTR 2015/1: the meaning of the terms 'passed on' and 'reimburse' for the purposes of Division 142 of the A New Tax System (Goods and Services Tax) Act 1999 (GSTR 2015/1).

The term 'passed on' is defined in section 195-1 of the GST Act as having the meaning affected by section 142-25 of the GST Act.

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 (paragraph 26 of GSTR 2015/1).

The matters relevant to determining whether GST has been passed on are outlined in paragraph 28 of GSTR 2015/1 and can include the supplier's pricing policy and practice and the documentary evidence relevant to that transaction.

Also relevant in determining whether or not the GST has been 'passed on', is the documentary evidence surrounding the overpayment. Paragraph 57 of GSTR 2015/1 provides that whether GST is included in the price of a supply or not may be demonstrated by the documents surrounding the transaction. For example, the invoices or statements issued, a contract or other correspondence between the parties may indicate that GST was included in the price.

You are not the supplier of the consignment goods. Your supply is of agency services to the consignors. The consignors set the price of their products and the products are priced when the consignors deliver stock to your shop. You sell the products at the retail price set by the consignor.

None of your consignors are registered or required to be registered for GST as they are small artisan or hobbyists' businesses. You have provided evidence of consignors invoices you received for the sale of the consignment goods minus the agreed commission amount.

You have provided examples of till receipts provided to the recipient of the consignment supply which evidences that GST was not included in the amount for the consignment goods by you to the recipient of the supply.

Further, paragraph 111 of GSTR 2015/1 provides that where an error is contained in the reporting on the GST return and that error does not affect the transaction between the supplier and its recipient, then this will generally demonstrate that the excess GST has not been passed on.

You have reported GST on your activity statements based on the total amount of the consignor sales (i.e. on a 'sale or return' basis), not based on the amount on your agent's commission on these sales. This was due to relying on reporting from a third-party accounting software which was not set up correctly to report your GST liability as an agent. This does not affect the transaction between the supplier (the consignor) and the recipient and is an error in reporting on your GST return.

Taking the facts of this case into consideration and, in the absence of evidence to the contrary, we accept that you have not passed on the GST on the supply of consignment goods in your capacity as an agent for the purposes of section 142-10. Therefore, you have sufficiently demonstrated that the excess GST on the sale of the consignment goods has not been passed on.

Question 2

Detailed reasoning

Based on the reasoning in Question 1, as per Note 2 at the end of subsection 142-10, you are not prevented from recovering the excess GST that is not passed on as described in section 155-75 in Schedule 1 to the Taxation Administration Act 1953.

Consequently, you are able to amend your activity statements to be refunded the excess GST paid, if the activity statements are within the period of review as specified in section 155-35 of Schedule 1 to the Taxation Administration Act 1953.