Goods and Service Tax

Goods and Service tax (GST) is levied on sales of all the goods and services tax in Australia. GST is generally chargeable at 10% of value of sales.

Benefits of Goods and Services Tax (GST):-

  • No Cascading of taxes
  • No Double taxation
  • No Entry tax, saving cost and time
  • Reduced compliance cost
  • Seamless flow of credit
  • Few number of taxes
  • Increase in Gross Domestic Product (GDP)

Input Credit: 
Business can get input credit of GST for tax paid on procurement of services as well as goods subject to certain conditions:

1. The business is registered for GST.
2. There is a valid tax invoice from the supplier of Goods or Service in case the invoice amount exceeds $50.
3. The goods and services are used for the purpose of business.

In order to claim the credit of GST you need to classify the purchases and expenses as ones liable for GST and ones which are not chargeable to GST. The same needs to be reported in BAS statement to be filed with ATO.

Chargeability of GST:
Business needs to charge GST at 10% for the value of sales done.

Cascading effect of tax by GST:
Cascading effect of tax is a situation in which the tax payer pays tax for more than once on the same goods/services. Australian gst refund prevents a cascading effect by its mechanism of giving credit for GST paid on goods/services purchased.Effectively the business has to pay GST only on the amount of profit made.

Reporting Mechanism:
GST credit availed and GST payable needs to be reported by the business in Business Activity Statement which needs to be submitted to Australian Tax Office.

Lets understand with example of small toy trader operating in Australia.

The trader can avail credit of GST paid on purchase of toys and the amount he paid towards that.However he is required to pay GST on the amount of toys he sold.The amount he paid as GST on purchases would be deducted from his liability to pay.Hence the amount of GST to be paid by the trader would be:

SN Particulars Basic Amount GST Amount
A Sales of Goods
$100
$10
B Purchase of Goods
($80)
($8)
C Net Amount (A-B)
$20
$2

The amount of GST ($2 in present case) needs to be paid to the ATO.

IMPORTANT DISCLAIMER:
This article does not constitute advice. This article is to be used as a general guide for our clients for their own private information Read More.

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