Goods and Services Tax
The GST framework
GST is a 10% broad-based consumption tax on supplies of goods and services, collected by registered entities. Key concepts: taxable supplies, GST-free supplies, input taxed supplies, and the GST turnover threshold for registration. Businesses claim input tax credits for creditable acquisitions.
Key concepts
Understand the difference between GST-free (e.g. basic food, health, education) and input taxed (e.g. residential rent, financial supplies). Input taxed supplies do not attract GST but also do not allow input tax credits. Know the margin scheme for real property, the treatment of imports (GST on taxable importations), and the reverse charge for inbound intangible supplies.
Traps
A frequent trap is claiming input tax credits on acquisitions relating to input taxed supplies, or misclassifying a supply as GST-free. Another is forgetting that GST is included in the price and must be remitted, while input tax credits are claimed on business purchases. Watch for the going concern exemption.
Worked example
A registered business sells goods for $11,000 including GST. GST payable = $1,000. It purchases stock for $5,500 including GST and claims an input tax credit of $500. Net GST remitted = $1,000 − $500 = $500. Rule of thumb: GST on supplies minus input tax credits on creditable acquisitions equals net amount payable.