GST is effectively a tax on final private consumption in Australia. The general rules on how it works are as follows:
It’s a tax on supplies and importations (unless input taxed or GST-free). GST is a tax on a supply or importation of anything (goods, services or anything else), except to the extent that the supply or importation is input taxed or GST-free.
Made by Registered person. A supplier or importer (except an importer of goods) must be registered under this Act. Anyone carrying on an enterprise (a term that includes a business) may be registered.
A thing is taxed each time it’s supplied or imported. A thing can attract GST each time it is supplied or imported along the commercial chain to its final consumption in Australia.
Suppliers and importers get input tax credit. To ensure that GST is effectively borne by consumers, anyone who is registered is generally entitled to an input tax credit for the GST on what they acquire or import for the purpose of their enterprise. Generally, the amount of the input tax credit is the same as the amount of GST that was:
– Included in the purchase price of the acquisition; or
– Paid to Customs on the importation.
In effect, the input tax credit is a reimbursement of the GST paid on the acquisition or importation.
GST is borne by private consumers. GST is effectively borne by consumers when they acquire anything to consume. However, there is no input tax credit for anything acquired or imported for private consumption. The effect of this is that consumers are not reimbursed for the GST paid on their acquisitions or importations. Consumers therefore bear the GST.
Remitted by suppliers. GST is remitted by suppliers who make supplies in carrying on their enterprise. Suppliers do not bear the GST because the tax is included in the price of what they supply.
