In a recent decision, the Administrative Appeals Tribunal has rejected a taxpayer’s claim for GST refunds after they claimed to be operating a gold refinery.
In Very Important Business Pty Ltd and Commissioner of Taxation (Taxation) [2019] AATA 1120, Very Important Business (VIB) claimed it was entitled to input tax credits with respect to scrap gold it made in the course of its business. In doing so, VIB contended that it was a refiner of precious metal pursuant to the A New Tax System (Goods and Services Tax) Act 1999. Further, VIB claimed that subsequent supplies of gold it had refined into bullion were GST-free supplies. Accordingly, it submitted that it was under no obligation to remit GST on those dealings and was entitled to claim full input tax credits on all its acquisitions.
However the Commissioner of Taxation disputed these propositions. In doing so, it questioned whether the acquisitions occurred as claimed in VIB’s invoices and records, arguing that VIB provided insufficient evidence of consideration for all acquisitions of scrap gold. Further, the Commissioner submitted that VIB’s record keeping was ‘seriously deficient’.
In March 2016, after seeking to verify the relevant GST return, the Commissioner withheld GST refunds that would have otherwise been paid to VIB. The following May, the Commissioner issued an amended assessment of net amount GST in which he disallowed the input tax credits. The Commissioner also conducted an assessment for penalty on the basis of reckless non-compliance with taxation laws.
In June 2016, VIB objected to the amended assessments on the basis that it had provided consideration for some of the acquisitions and that the Commissioner had erred in verifying those cash payments. VIB also contended that the Commissioner had erred in evaluating the legal position regarding input tax credits claimed for the purchase of scrap gold from unregistered suppliers. In doing so, VIB claimed that it had correct tax invoices. Despite this, in November 2016, the Commissioner disallowed VIB’s objection.
VIB subsequently brought the matter before the tribunal, seeking review of the Commissioner’s objection decisions.
Accordingly, the tribunal was required to determine whether VIB was entitled to input tax credits in the sum of $55,153 for the acquisition of $606,702 of scrap metal in the quarterly tax period ending 31 December 2015. Ultimately, determination of this issue was dependent on whether VIB had made creditable acquisitions for the purposes of the GST Act.
The matter was considered on 4 June 2019, at which the Tribunal was not satisfied that VIB had taken over the refinery business or that it was regularly refining prior to 31 December 2015. The Tribunal also concluded that there were inadequacies in the evidence and documentation of the alleged purchase transactions, including that a number of the transactions were actually made by the refinery’s previous operator.
Ultimately, the Tribunal was not satisfied that VIB was a refiner of precious metal in the relevant period, however did accept that VIB was undertaking some activities and was therefore ‘carrying on an enterprise’ for the purposes of the GST Act. In doing so, the Tribunal affirmed the Commissioner’s objection decisions in relation to both the assessment of net amount and penalties.
