Issue
Is the entity, a recipient of goods who is not registered or required to be registered for goods and services tax (GST), entitled to an input tax credit under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), for the GST that is included in the price of goods acquired?
Decision
No, the entity is not entitled to an input tax credit under section 11-20 of the GST Act for the GST that is included in the price of goods acquired.
Facts
The entity is a recipient that is not registered nor required to be registered for GST. The entity is not carrying on an enterprise.
The supply of the goods to the entity is a taxable supply under section 9-5 of the GST Act.
Reasons for Decision
Under section 11-20 of the GST Act, an entity is entitled to an input tax credit for any creditable acquisition that it makes.
Section 11-5 of the GST Act sets out the requirements for a creditable acquisition. An entity makes a creditable acquisition if: a) it acquires anything solely or partly for a creditable purpose; and b) the supply of the thing to it is a taxable supply; and c) it provides, or is liable to provide, consideration for the supply; and d) it is registered, or required to be registered for GST.
The acquisition must be for a creditable purpose (paragraph 11-5(a) of the GST Act). Subsection 11-15(1) of the GST Act provides that a thing is acquired for a creditable purpose to the extent that it is acquired in carrying on an enterprise. As the entity is not carrying on an enterprise, the acquisition is not for a creditable purpose. Therefore, paragraph 11-5(a) of the GST Act is not satisfied.
In addition, as the entity making the acquisition is neither registered nor required to be registered for GST, paragraph 11-5(d) of the GST Act is not satisfied.
As all the requirements in section 11-5 of the GST Act are not met, the entity is not making a creditable acquisition when it purchases the goods. Therefore, the entity is not entitled to an input tax credit under section 11-20 of the GST Act for the GST that is included in the price of the goods acquired.