Question

Act 5.1

What is the basic, underlying principle of GST as it relates to supply? Conduct your own research. (100–120 words)

Answer 1

1) A supply is any form of supply whatsoever.

(2) Without limiting subsection (1), supply includes any of these:

1. a supply of goods;

2. a supply of services;

3. a provision of advice or information;

4. a grant, assignment or surrender of real property;

5. a creation, grant, transfer, assignment or surrender of any right;

6. a financial supply;

7. an entry into, or release from, an obligation:

1. to do anything;

2. to refrain from an act;

3. to tolerate an act or situation;

1. any combination of any 2 or more of the matters referred to in paragraphs (a) to (g).

…

However, a supply does not include a supply of money unless the money is provided as consideration for a supply that is a supply of money.”

This definition is very broad and is intended to define supplies as widely as possible. Although subsection 9-10(2) lists a number of types of supplies, this list is not exhaustive and does not exclude anything that might otherwise come within the concept of “any form of supply whatsoever”.

3. GST on Taxable Supplies

Whether something constitutes a supply is important for the purpose of determining whether there is a GST liability. This is because there must be a “supply” in order for there to be a “taxable supply” upon which GST can be charged1.

Section 9-5 of the GST Act provides:

“You make a taxable supply if:

1. you make the supply for consideration; and

2. the supply is made in the course or furtherance of an enterprise that you carry on; and

3. the supply is connected with Australia; and

4. you are registered, or required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.”

In considering the GST implications of a transaction, it is very important to ascertain whether one or more supplies is being made and, if so, the nature of the supplies made (i.e. what are the supplies?). Although this is simple for many ordinary transactions, it can be more complicated for complex transactions where a number of supplies are made, or where more than two parties are involved. It is particularly important that registered suppliers ensure that they correctly identify the supplies and, most importantly, the taxable supplies that they make because they need to self-assess to determine their GST liability. If they do not correctly calculate and account for their GST liability, they may be liable for penalties and interest. A supplier who does not correctly account for a transaction may not be able to recover the GST from the recipient(s) of the supply/supplies. The supplier may have to personally wear the unexpected GST cost.

The more complicated transactions are often the ones that need judicial clarification because they give rise to disputes between the Commissioner of Taxation (Commissioner) and the taxpayer, or between two or more parties involved in the transaction. Consequently, GST cases provide us with some guidance as to how to the GST laws operate.