ATO ID 2008/16: GST and claiming input tax credits where GST ceases to be payable
Date of decision: 8 January 2008
Business line: Indirect Tax

Issue
Is the entity, a recipient of a taxable supply, entitled to any amount of an input tax credit under Division 11 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it acquires a taxable supply from a supplier who:

Decision
No, the entity is not entitled to any amount of an input tax credit under Division 11 of the GST Act, when it acquires a taxable supply from a supplier who treated the supply as non-taxable, did not charge GST, either did not issue a tax invoice or issued an invoice showing that no GST was payable on the supply, and is now not required to pay GST on that supply due to the application of section 105-50 of Schedule 1 to the TAA. While the entity may have been entitled to an input tax credit, the amount of the input tax credit is now zero due to the operation of section 11-25 of the GST Act.

Facts
The entity is registered for goods and services tax (GST). The entity is a recipient of a taxable supply from a supplier, though at the time of the transaction the supplier treated the transaction as non-taxable. The acquisition was a creditable acquisition by the entity in that it was for a creditable purpose and the entity provided consideration for the supply. The price charged by the supplier to the entity did not include an amount of GST. The supplier either did not issue a tax invoice to the entity or only ever issued a tax invoice indicating that no GST was payable on the supply. The Commissioner has not required payment of the additional net amount in respect of the relevant tax period in which the particular transaction occurred to reflect the increased GST payable on the transaction treated as non-taxable by the supplier. More than four years has elapsed since the transaction occurred and since the net amount became payable for the tax period in which the particular transaction occurred. Although the transaction is a taxable supply, the supplier in this circumstance is not required to pay the unpaid GST to the Tax Office because the GST has ceased to be payable due to the operation of section 105-50 of Schedule 1 to the TAA.

Reasons for decision
Summary: Under section 11-20 of the GST Act, you are entitled to the input tax credit for any creditable acquisition that you make. Section 11-5 of the GST Act provides that you make a creditable acquisition if: The acquisition was a creditable acquisition by the entity in that it was for a creditable purpose and the entity provided consideration for the supply. Section 11-25 of the GST Act provides that the amount of the input tax credit for a creditable acquisition is equal to the GST payable on the supply. Section 105-50 of Schedule 1 to the TAA provides that any unpaid net amount or amount of indirect tax ceases to be payable four years after it became payable, unless the Commissioner: As section 105-50 of Schedule 1 to the TAA applies to the supplier, any GST that was payable on the supply has now ceased to be payable. As there is now no GST payable on the supply due to the operation of section 105-50 of Schedule 1 to the TAA, and the amount of the input tax credit must be equal to the GST payable on the supply under section 11-25 of the GST Act, the amount of input tax credit the entity is entitled to claim is now zero.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 Division 11 section 11-5 section 11-20 section 11-25 section 29-10 subsection 29-70(2)
Subject references: Creditable acquisition Goods and services tax GST input tax credits & creditable acquisitions GST supplies & acquisitions GST supply Taxable supply