Goods and Service Tax

GST & BAS

By – Bhargav Kejkar

Introduction

• Introduced on 1st July 2000 and replaced sales tax.

• Under the current tax system in Australia specific good & services have a tax levied on them at 10%.

• One of the most important things to remember is that GST is not tax deductible.

GST Free Goods

• Health and Medical care. • Educational supplies.• Fresh food and beverages.• Cars for disable people etc.

BAS

A Business Activity Statement is a form that is lodged with the Australian Taxation Office (ATO) that reports a client’s obligations and entitlements relating to:

• GST (similar to VAT)• Wine equalization tax• Luxury car tax• Pay As You Go (PAYG) amounts withheld from payments (similar to

TDS)• PAYG installments• Fringe benefits tax installments

LODGEMENT OF BUSINESS ACTIVITY STATEMENT

• If annual turnover < $ 20 million, entity can choose to lodge BAS either quarterly or monthly.

• Quarterly tax periods are July 1st - September 30th

Oct 1st - Dec 31st Jan 1st - March 31st April 1st - June 30th

Accounting For GST

• On Cash Basis – on receipt basis , when– Annual turnover < = $1 Million– Accounting for Income tax on receipt basis– Charitable institution, a trustee of charitable fund or a gift

deductible entity

• On Non - Cash Basis – on Accrual Basis, when– Any consideration is received or Paid– Any invoice (a document notifying an obligation for

payment) is issued by supplier or issued to purchaser

Accounting for GST• GST on income (Credit in Balance Sheet)

(always PAYABLE) = GST on sales = GST payable control account = GST Collected• GST on expenses (Debit in Balance Sheet)

(always RECEIVABLE)= GST on sales = Input tax credit account = GST Paid

• Net GST = GST on income – GST on expense

• GST Payable / Refundable – GST on sales > GST on Purchases = GST Payable

(Net credit) – GST on sales < GST on Purchases = GST refundable

(Net debit)– Transferred to GST Clearing for Clearing Purpose

Accounting treatment for GST• While dealing with GST a/cs, we usually have to

face following a/cs(a) Input Tax Credit Control A/c(b) GST output control a/c(c) GST Clearing a/c(d) BAS payable(e) GST output tax credit adjustment a/c

etc.• GST Clearing a/c consist of all quarterly GST

payments / receipts.• BAS payable shows last year’s last quarter’s

liability.

• Firstly we transfer GST clearing a/c balance to suspense a/c.

• Then, GST on sales and GST on purchase trf to GST clearing a/c. GST clearing a/c will show net GST.

• We check detailed ledger for how these quarterly payments or receipts had been made.

• After which we pass entries of those payments.

Entries are shown below…. 1. Last year BAS cleared.

BAS Payable a/c Dr To Suspense a/c

2. Current year BAS clearedGST Clearing a/c Dr To Suspense a/c

3. Create current year’s last quarter liabilityGST Clearing a/c Dr To BAS Payable a/c

Making ATO Payments/Refunds for C.Y.• GST Clearing Account

– All the ATO (GST) Payments or refunds relating to 3 quarters (Sep, Dec, March) are transferred to GST Clearing Account

• PAYG W/H Payable Account – All the ATO (PAYG W/H) payments are transferred to Debit of PAYG W/H

Liability Account

• Net Wages Account– All the ATO (PAYG W/H) payments are transferred to Debit of Wages to make

it Gross, as clients in Australia are allowed to Claim PAYG W/H as a direct deduction

• Fuel tax Credit Account– All the ATO (Fuel Tax credit) refunds are transferred to P & L credit as Diesel

Fuel Rebate

• PAYG Installments– All the ATO(IAS) payments are transferred to Debit of Equity section of

Balance Sheet as PAYG tax Installments

Example

• Practice Job 2

THANK YOU