ATO ID 2001/388: GST and non-payment of GST component on an invoice
Date of decision: 26 July 2001
Business line: Indirect Tax

Issue
Does the entity, a supplier of goods, have a goods and services tax (GST) liability under section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies goods to a company that refuses to pay the GST component included in the price of the goods?

Decision
Yes, the entity does have a GST liability under section 9-40 of the GST Act, when it supplies material to a company that refuses to pay the GST component included in the price of the goods.

Facts
The entity is a supplier of goods. The entity supplies goods to a company that refuses to pay the GST component included in the price of the goods. The entity is registered for GST. The supply of goods is for consideration. The supply is made in the course or furtherance of an enterprise carried on by the entity in Australia. The entity accounts for GST on a non-cash basis. The entity issued the invoice for the goods prior to receiving any consideration for the supply.

Reasons for decision
Summary: Section 9-40 of the GST Act provides that it is the supplier who must pay the GST payable on any taxable supplies it makes. An entity makes a taxable supply under section 9-5 of the GST Act if: In this case, the entity is registered for GST. The supply of goods is for consideration and is made in the course of the enterprise carried on by the entity in Australia. Accordingly, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies goods to the company. Therefore, the entity has a GST liability under section 9-40 of the GST Act, when it supplies goods to a company that refuses to pay the GST component included in the price of the goods. The entity's GST liability is 1/11th of the price of the goods invoiced.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-40 Division 21
Subject references: Goods and services tax Taxable supply