A taxpayer has had mixed success before the Small Business Claims Tribunal in arguing that the supply of gold was GST-free. The taxpayer acquired gold which it purported to refine so that it satisfied the definition of precious metal. This meant that the supply by the taxpayer was GST-free under s 38-385 of the GST Act (or so the taxpayer contended). It also claimed that other supplies of gold had been exported, ie which were GST-free under s 38-185. The Commissioner has now (23.10.21) appealed this decision to the Federal Court (see related TT article).
The Commissioner disputed the character of the taxpayer’s supplies, ie the ATO argued that those supplies did not satisfy the statutory requirements for GST-free supplies. Alternatively, the Commissioner said that the general anti-avoidance provisions in Div 165 applied to disallow the claims for input tax credits.
The taxpayer was unsuccessful in proving that the supplies were GST-free under s 38-385. There was no proof that the requisite refining had been done. In addition, the taxpayer was unable to prove that it met the definition of a dealer in precious metal. Accordingly, the taxpayer was liable for the GST on the supplies it made – which resulted in penalties being imposed. However, the Tribunal agreed that the second group of supplies were GST-free pursuant to s 38-185, ie as an export.
The Tribunal also ruled that the anti-avoidance provisions in Div 165 did not apply. It concluded that the taxpayer had discharged the burden of proving that it would not be concluded that any entity had a dominant purpose of securing its entitlement, ie in the whole transaction chain. A key factor seems to be that the taxpayer had few if any dealings with the entities involved in the supply sequence preceding its acquisition of gold.
(STNK v CofT [2021] AATA 3399, AAT, Olding SM, 17 September 2021.) [LTN 185, 24/9/21]
Catchwords
TAXATION – GOODS AND SERVICES TAX – whether the applicant made a GST-free supply as the exporter of goods – relevance of whether applicant held title to goods at time of export – whether general anti-avoidance rule applies – whether dominant purpose or principal effect of scheme for applicant to obtain input tax credits – where applicant had no knowledge of and obtained no substantial benefit from scheme – held applicant exported goods – held general anti-avoidance rule does not apply – decision set aside.
TAXATION – ADMINISTRATIVE PENALTIES – whether shortfall in GST returns due to applicant intentionally disregarding GST law or reckless as to operation of the law – where tax agent who prepared returns did not give evidence – whether base penalty amount assessed correctly – penalty reduced to penalty for recklessness – held no evidentiary foundation to further reduce base penalty amount or remit penalty in whole or part.
EVIDENCE – application of s1305 of Corporations Act 2001 in reviews of taxation decisions – whether invoices therefore prima facie evidence of transactions they describe – held s1305 does not apply in applications for review of taxation decisions
[Tax Month – September 2021] [25.9.21]