DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

GST Free v No Tax


#1

Can anyone please explain what the difference/s are between “GST Free” and “No Tax” ?

The reason for asking is that when I import goods from the UK, there is no GST charged by the supplier but of course, I do cop a bill from customs (via Fedex) for the Electronic Entry and the GST.

Hopefully, I have been doing things the right way by following these steps but would of course appreciate any advice or comments if it should be done differently.

  1. Goods are received with an invoice from supplier and payment is made.
  2. Purchase Invoice is raised showing items and item costs using “GST Free” as the Tax Code.
  3. Customs (Fedex) is received showing costs for the Electronic Entry and GST Reimbursed.
  4. New Bank Transaction (Spend Money) is created for Fedex showing the Electronic Entry Fee as being
    “GST Free” and the GST Reimbursed figure as “GST on Imports”.

The main reason for my question is that I always have trouble (in my simple little mind) with working out whether or not my GST Report is correct as I can never get my head around the figures that show up in items G10 through to G20.

I am also running my accounts on a Cash Basis and I’m sure that I was told, at one stage, that using Cash instead of Accrual can (or does) make it difficult (or virtually impossible) to double check the tax figures against the month’s transactions.

As always, thanks for all of your help and advice.

Cheers

Paul


#2

GST Free applies to items that are GST taxable but at a zero rate compared to a 10% rate, whereas No Tax applies to items which are exempt (external) from the GST system. But over time these have become interchangeable as both have zero GST.

Why are you running on a Cash Basis, it is far simpler for businesses to be on Accrual Basis especially those involved with inventory.

What do you see as the perceived benefit of being on Cash Basis ?


#3

for India, there exists quite a substantial difference between Zero Rated and Exempted Supplies, as described in this official publication…
http://gstcouncil.gov.in/sites/default/files/GST-Fliers/28-Zero%20ratings%20of%20suplies.pdf


#4
  • If you are importing goods to Australia where you will be charged GST separately, then your supplier invoice should be No tax and then the invoice for GST should be using GST on Imports tax code.
  • If you are importing goods to Australia where you will not be charged GST at all. Then on supplier invoice, you’d use GST Free tax code.
  • If you are importing goods to Australia and you are under deferred GST scheme, then you’d use GST 10% (Deferred) tax code on supplier invoice.

These three scenarios cover all the possibilities when importing goods to Australia.


#5

Brucanna,

I actually started the business as a semi-retirement “hobby” for some pocket money and as over 90% of my sales are paid for upfront, I thought that using the Cash Basis was the easiest and best option.

I also only sell a single product with a few minor variations so my inventory list is very small as well.

Although the business is still running well and not showing any signs of a downturn, rather than trying to change things and attempting to train my geriatric brain again, I’ve just stuck with what I’m used to.


#6

Currently it’s still a bit more difficult to troubleshoot tax reports on cash-basis. But this is a program fault. In future, it shouldn’t matter whether you are on cash-basis or accrual-basis. Both should be equally easy.


#7

Well it must be doing well then to be exceeding the GST registration threshold.


#8

Lubos,

I can hear what you are saying about the difficulties in troubleshooting tax reports but I’ve been using Manager for several years now and although I have had a few minor hiccups, I’m sure that most of these have been created by DAK (the dope at the keyboard).

Overall, I’ve been over the moon and more than happy with the program and have seen first hand, the amount of work and development that’s been going on.

I actually showed Manager to an accountant that I know and recently found out that this former “MYOB Disciple” has been getting many of her clients to swap over to Manager !!!


#11

Lubos,

As Brucanna mentioned that “GST Free” and “No Tax” are virtually interchangeable, is there any advantage or disadvantage in going back and changing all Purchase Invoices (at least to the beginning of the last financial year) from “GST Free” to “No Tax”’ or should I just ensure that I treat all future purchases correctly ?

Also, if I do go ahead and make the changes, is it likely to cause major issues ?


#12

It will not change the net GST payable and therefore you shouldn’t bother changing past transactions.


#13

Thanks Tony, much appreciated !


#14

Using GST Free tax code means the transaction will show on your BAS. Using No tax means transaction won’t show on your BAS.

From accounting point of view, whether you use GST Free or No tax will make no impact but it will make impact on BAS worksheet.

As @tony says, probably no point in fixing historical transactions as it won’t affect your GST liability but going onwards, you want to use correct tax codes so your BAS figures are correct.


#15

The tables included in the following ATO reference provide examples of GST Free vs Non-Reportable transactions:


#16

@lubos
Same question on import GST with a twist:
I get to recharge the GST back to my client, GST at cost, other charges at cost +10%
This also allows my client to be able to claim the GST.

However I’m a bit lost to set this up properly in Manager.
Couldn’t find GST ‘free’ , only found ‘no GST’ or 10% GST
Invoice from forwarder/broker


Purchase Invoice

Quote/invoice to client


#17

There is GST 10% on Import tax code which you should use when being charged pure GST.

Why is your client being charged GST only? I’d assume you sell them something where the price is GST inclusive.