A taxpayer that paid excess GST because it treated GST-free supplies as taxable supplies was not entitled to a refund.
The facts were these.
- The taxpayer supplied and administered cosmetic injectables.
- During the periods from 1 April 2016 to 31 March 2019, it accounted for GST on the supplies as if they were wholly taxable.
- In fact, the supplies were mixed supplies comprising a GST-free supply of cosmetic injectables (90%) and a taxable supply of administering the cosmetic injectables (10%).
- The taxpayer therefore sought a refund of the amounts it had overpaid as GST.
The AAT agreed with the ATO that the taxpayer was precluded by s 142-10(1) of the GST Act from obtaining a refund because it had passed on the excess amounts to its customers and had not reimbursed them for the amounts passed on. The AAT concluded that the evidence did not establish facts “that take this case outside the usual position that profitable businesses recover all of their costs, which includes GST and amounts mistakenly paid as GST, in the prices charged to their customers”.
The AAT then, “with some hesitation”, rejected the taxpayer’s submission that it was entitled to the benefit of a decision under s 142-15, treating s 142-10 as never having applied, because refunding the excess GST would not result in a windfall gain. The AAT said that s142-15 was intended to apply where refunding the taxpayer would not result in a windfall gain. In this case, however, the taxpayer traded in a way, that was commercially acceptable to it, by passing on its costs, including the amount of GST, that it assumed was payable and, in the AAT’s opinion, refunding an amount, “the burden of which has been passed on to another entity”, will usually result in a windfall gain.
(M3K Services Pty Ltd and FCT [2021] AATA 4416, AAT, Olding SM, 26 November 2021.)
[LTN 232, 2/12/21]
[Tax Month – November 2021 – Previous 2021] 2.12.21