Announcements
COVID-19 update: Check out our answers to common questions about JobKeeper payment and early release of super.

ATO Community

Re: GST on materials reimbursement

Highlighted

Newbie

Views 2328

Replies 7

Hi There,

 

I would like to clarify on of the doubt on the charging of GST on the material purchased by the contractor.

 

For example :

I bought a material for $ 100.00 Including GST

Labour charges : $100.00 Excluding GST

 

so when I would create an invoice

 

Material $100.00

Labout $ 100.00

GST    $   20.00

Total    $ 220.00

Is it correct as material already include GST in it, and I am charging GST again on material, is it legitimate? or it would considered as my markup.

 

Please advise the correct way of it and reference if any.

 

Kind Regards,
Lalit

1 ACCEPTED SOLUTION

Accepted Solutions
Highlighted

Best answer

ATO Certified

Community Support

Replies 0

Hi @Lbhardwaj,

 

Thanks for your post!  We can provide you with general information in ATO Community that may help you with your situation.

 

The answer is yes – they are two separate things. This example may assist you:

 

GST on materials:
• Client purchased materials for $100 so the GST on that $100 is $9
• The client can claim a credit on his or her BAS as it is not as an ITC (input tax credit 1B)

 

GST charged to the client:
• If registered for GST they must charge GST – which is 10%
• The client then collects the GST on behalf of the ATO and reports this at 1A (GST on sales) on the BAS

 

This link to our website can explain taxable sales further and may assist you.
 

If you find this post helpful, please give it a thumbs up.

Thanks, JodieM

7 REPLIES 7
Highlighted

Taxicorn

Replies 4

GST = Goods AND Services Tax.

 

Therefore you charge GST on Goods (Materials) and Service (Labour).

 

Highlighted

Newbie

Replies 3

Hi Macfanboy,

 

Thank you for your response, but it did not solve my problem.

I am aware of charging gst, but real question is should i chrage GST again on the Material which already includes GST when i purchased from supplier while invoicing my customer.

 

Sorry if i did not phrased the question correctly in first post.

Highlighted

Best answer

ATO Certified

Community Support

Replies 0

Hi @Lbhardwaj,

 

Thanks for your post!  We can provide you with general information in ATO Community that may help you with your situation.

 

The answer is yes – they are two separate things. This example may assist you:

 

GST on materials:
• Client purchased materials for $100 so the GST on that $100 is $9
• The client can claim a credit on his or her BAS as it is not as an ITC (input tax credit 1B)

 

GST charged to the client:
• If registered for GST they must charge GST – which is 10%
• The client then collects the GST on behalf of the ATO and reports this at 1A (GST on sales) on the BAS

 

This link to our website can explain taxable sales further and may assist you.
 

If you find this post helpful, please give it a thumbs up.

Thanks, JodieM

Highlighted

Newbie

Replies 1

Its not really a problem.

You get credits for the GST you paid on the materials.

You paid $100 which included $10 of GST.  You get $10 credit.

 

What you sell those materials for is up to you, you could sell them for $100 including GST of $10. but you wouldn't be making a profit.

It would cancel out the $10 credit you have with the ATO though.

 

If you sold the materials for $200 including GST of $20, you would owe the ATO $10 after taking away the $10 credit you received when purchasing the materials.

 

I guess you can sell the materials at a loss too, but I'm not sure how that would pan out.

 

The services you provide have no inputs, so any amount you charge needs to have the 10% GST added.

 

Combining materials and services doesn't change the situation, its still 10% you owe the ATO,

Anything you purchase that includes GST, you get credits for, so you have to decide if you sell the materials based on your actual cost after credits, or if you want to make more profits and as a consequence, give the ATO more money.

Does that answer the question?

 

Disclaimer: I'm not an expert or someone you should take advice from, I'm just writing how I understand things, I could be totally wrong.

 

Highlighted

Devotee Registered Tax Practitioner

Replies 0

@sedman @Lbhardwaj @JodieM @macfanboy 

 

Business Owners often buy materials for clients and do not want a markup.

A copy of the Tax Invoice is given by the purchaser to the client..

 

I understand the materials cost $100 including GST.

 

If you do not want a markup, I believe the Tax Invoice amount would be $210.

Materials $100 including GST and Labour $110 including GST.

 

Duncan Smith

Highlighted

Initiate

Replies 0

Thanks for providing the details.I dont know about that but your post helps me to understand GST.

Highlighted

Devotee Registered Tax Practitioner

Replies 0

Material $100.00

Labout $ 100.00

GST    $   20.00

Total    $ 220.00

Is it correct as material already include GST in it, and I am charging GST again on material,

 

If you want to be GST neutral, then it is

Material $ 90.91

Labout $ 100.00

<>           190.91

GST    $    19.09

Total    $  210.00

 

I am charging GST again on material, is it legitimate?

 

That would depend on the terms of your supply contract.

 

If you are quoted            labour + materials at cost, then it is $ 210 incl GST

 

If you had simply quoted              $ 220 incl materials, then that is what it is.