Goods and Services Tax

Goods and Services Tax - GST

GOODS AND SERVICES TAX - GST

Under the GST legislation, contractors and suppliers will not have a statutory right to adjust (gross-up) a previously agreed payment in the event that GST is payable. Contractors and suppliers will need to rely on their contractual rights.

For contracts entered before, and spanning 1 July 2000, a provision which adds GST to the price, if it becomes payable, is generally preferable to the fixing of "GST inclusive" prices. At this stage, it is often difficult to accurately estimate the amount of GST that will be payable on supplies which are to be made in the future. Therefore in requiring a GST inclusive price there is a risk that contractors and suppliers will over allow resulting in a higher than necessary "inclusive" price.

The following clause is typical of the wording that we are including in all new tender documents.

GOODS AND SERVICES TAX   .1     Unless expressly stated otherwise, all prices or other sums payable or any other consideration provided or to be provided under or in connection with this Contract do not include GST.
  .2     Unless expressly stated otherwise, the Contractor may recover from the Principal, and the Principal must pay, the amount of any GST payable under the GST law on or for any taxable supply made by the Contractor to or for the benefit of the Principal under or in connection with this Contract, subject to the Principal receiving a valid tax invoice in respect of that taxable supply, at the same time at which it receives the invoice to which that taxable supply relates.
  .3(a)   If the introduction or any variation of the GST is associated or connected with the abolition or reduction of any tax, duty, excise or other statutory charge which directly or indirectly reduces the cost of making any supply under this Contract, the price or any other consideration (excluding GST) payable for the supply must be reduced by the Contractor in accordance with the guidelines issued by the Australian Competition and Consumer Commission pursuant to Part VB of the Trade Practices Act 1974 (C'th).
  .3(b)   The Contractor must provide upon request by the Principal evidence to demonstrate that it has complied with this subclause (3) and if required by the Principal shall allow an audit thereof by an auditor appointed by the Principal.
  .4     Wherever this Contract requires the Principal to pay, reimburse or contribute to an amount paid or payable by the Contractor in respect of an acquisition from a third party for which the Contractor is entitled to an input tax credit, the amount for payment, reimbursement or contribution will be the GST exclusive market value of the acquisition by the Contractor plus, if the Contractor's recovery from the Principal will be a taxable supply under the GST law, the GST payable in respect of that supply.
  .5     Terms and expressions used in this clause which are defined in the A New Tax System (Goods and Services Tax) Act 1999 and any regulations ("GST Act") have the same meanings given to those terms and expressions in that Act.

For advice concerning this issue please contact:

CONTRACTS & PURCHASING SERVICES PTY LTD
15 Glen Road
Ashburton 3147
Melbourne, Australia
Tel: (03) 9885.2899
Mobile: 0417 885 747
Fax: (03) 9885.2866
email: jburke@contracts.com.au

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