Private ruling: GST and refund of overpaid GST
Published: March 2015

Ruling: Q1: Are you entitled to a refund of goods and services tax (GST) overpaid on supplies of services that are not subject to GST for the Refund Periods? | A1: Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. • You are a law firm comprised of two partnerships (A & B), both being based overseas. • You are an Australian partnership and a member of part of overseas partnership A. • You provided services to partnership B and treated those supplies as taxable as at the time you were of the opinion that as an Australian subsidiary entity was involved the supplies would not be GST-free. • You applied for a Private Binding Ruling (PBR) from the Australian Taxation Office (ATO) seeking the correct treatment of those supplies and received a PBR in which the Commissioner found that the litigation services provided by you to partnership B were GST-free. • As a result of the PBR you have overpaid GST to the ATO. • Partnership B is not registered for GST in Australia. • You have reimbursed partnership B the overpaid GST by electronic funds transfer. • You have requested a refund of the overpaid GST.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 : Section 38-1 | Schedule 2 | Division 142 | Taxation Administration Act 1953 Section 105-65 of Schedule 1

Reasons for decision: Summary: The PBR issued to you confirms that you made a supply of services to partnership B and received consideration inclusive of GST for those services. The PBR also confirms that those services were GST-free. You remitted the GST to the ATO. As you have paid GST in respect of these GST-free supplies it follows that you have made an overpayment of GST. As you have reimbursed the recipients of the supply section 105-65 of Schedule 1 to the Taxation Administration Act 1953 (TAA) does not apply to restrict this refund for the tax periods prior to 1 June 2014. Additionally even though Division 142 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) applies to restrict this refund for the relevant tax periods, section 142-10 of the GST Act provides that an amount of excess GST will be refundable if: • it has not been passed on to the recipient, or • it has been passed on to the recipient, and the recipient has been reimbursed. As you have reimbursed the recipients of the supply we consider it appropriate that the Commissioner allow a refund to you of the overpaid GST amounts for the Refund Periods. | Detailed Reasoning - Detailed reasoning: Section 105-65 of Schedule 1 to the TAA applies to restrict certain refunds of overpaid GST. It applies where an entity has overpaid amounts because a supply was treated as a taxable supply when the supply was not a taxable supply and the recipients have not been reimbursed an amount corresponding to the overpaid GST. In your circumstances the supply of services was treated as a taxable supply when the supply was not a taxable supply and the recipients have been reimbursed an amount corresponding to the overpaid GST. Accordingly section 105-65 does not apply to restrict the refund in these circumstances and you are able to claim the refund by amending their business activity statement(s). | Detailed Reasoning - Whether Division 142 of the GST Act applies to your circumstances: Division 142 GST Act applies to refund any '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 GST Act. Under section 142-10 of the GST Act an amount of excess GST will only be refundable if: • it has not been passed on to the recipient, or • it has been passed on to the recipient, and the recipient has been reimbursed. Goods and services tax ruling GSTR 2014/D4, Goods and services tax: 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 provides the ATO's view on the operation of Division 142 of the GST Act. The overpayment of GST occurred as a result of you treating the supply of services as taxable and remitting GST in their BAS' for the Refund Period in accordance with the requirements of the GST Act to the ATO. For the reasons specified above we therefore accept that it is appropriate in these circumstances to allow the refunds of the overpaid GST. | Detailed Reasoning - BAS amendments: If you made a GST error on an earlier activity statement, you can choose to correct that error on a later activity statement. You do not need to amend each individual BAS. The benefits of correcting GST errors on a later activity statement are: • you are not liable to any penalties or general interest charge (GIC) for any GST error you correct on a later activity statement provided you meet the conditions to correct a GST error on a later activity statement You can correct a credit error on a later activity statement if all of the following conditions apply for each credit error: • the credit error is within the credit error time limit • you are not subject to a compliance activity • you have not corrected the GST error in another reporting period. Generally, it is easier to correct a GST error on a later activity statement rather than revising the earlier activity statement.