Company B sells cars to Company C.
Under a business agreement, Company A (a dealer) will apply and pay for the registration of cars under the name of Company C (end user). Company A will invoice Company B (wholesaler) for the said registration costs, and Company B will then invoice Company C (as part of the sale of the car).
All companies are registered for GST.
Q1: How do we account for the GST component of the car registration across all stages of the transaction, highlighting the fact that the car will be registered under the name of Company C - hence the registration invoice will refer to Company C? Assume the registration cost is $3,300 (GST-inclusive).
Option A:
Company A issues GST-inclusive invoice to Company B for $3,300.
Company B pays Company A for $3,300, and claims $300 input tax credit in its BAS, but gets offset against $300 output tax from issuing an invoice to Company C for the same amount ($3,300).
Company C pays company B for $3,300, and claims $300 input tax credit in its BAS.
Option B:
Company A issues GST-inclusive invoice to Company B for $3,300
Company B pays Company A for $3,300, but DOES NOT claim $300 input tax credit in its BAS, and then invoices the full $3,300 to Company C (nothing reflected in Company B's BAS).
Company C pays company B for $3,300, and claims $300 input tax credit in its BAS (based on the registration invoice).
Q2: When Company A and Company B issues the invoices relating to the car registration cost, does it need to add another 10% GST to the total amount each time?
e.g. Company A issues invoice of $3,630 to Company B. Then Company B issues invoice of $3,993 ($3,630 x 1.1) to Company C.
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