GST on Purchase but not on Sales

How would you set up GST on Purchases but not on Sales ?

We are not GST registered, so when we buy products from the supplier, we have to pay GST and this becomes part of the cost of our products. We still want to be able to show the GST on the ‘Purchase Items’ of the ‘Purchase Order’, because that is what our supplier wants to see. But, as soon as we receive these items, we need to include the GST in the cost, rather than keep it seperate.

If you add GST to the ‘Purchase Invoice Item’, and link these to the ‘Inventory Item’ when you enter a ‘Purchase Invoice’, then the GST portion will be posted to a ‘GST Paid’ expense account, while in fact I want it to post to the ‘Cost Of Goods Sold’. And the cost of the ‘Inventory Item’ will only reflect the amount without GST, while it should include the GST portion as well.

One workaround I see is to change the prices on the ‘Purchase Invoice’ to include GST and clear the ‘GST’ field at the end of the line. It works but is a lot of extra work and prone to errors.

Is there a better way ?

If you are not registered for GST, make purchase order which will show all prices as GST-inclusive and make no mention of GST. It’s not your call to decide what is GST-taxable supply anyway. It’s up to your supplier to decide that. So I see no reason why your supplier would want to see that.

I could do that, but the reason I wanted to show GST is because the supplier sends me a price list with GST exclusive prices, so if I order and could show those same prices on the purchase order, it would make it easier for both of us to check we’re talking about the same thing and have our prices matching.

Not a showstopper, I just thought maybe there is a way I hadn’t thought about.

If you are in Australia, (correct me if I’m wrong) legislation says that supplier must present their prices inclusive of all tax components. The only exception is if their customer is also registered for GST, then they can present their prices as GST-exclusive only.

So the solution is simple. They should put on their price list GST-exclusive price and GST-inclusive price at the same time if they sell to entities not registered for GST.

My experience is that our Suppliers (in Australia) quote prices EX GST. It is added at the end. I agree with Sloeman and am also looking at how to show the prices on my purchase order/purchase invoice the same way. It would make it so much easier for checking. Thanks in advance.

The problem here is, if you are not registered for GST then your accounting system should not be set up to cater for GST.

Trying to make the Purchase Order acceptable - to match supplier prices - leads to problems, but if you must then don’t “Clone” the purchase order to purchase invoice - just do separate data entry.

Brucanna, did you read the original post ? It is a fact that some businesses that are not GST registered will have to process invoices from businesses that are GST registered, If such a GST registered supplier refuses to list GST inclusive prices on their invoice, but only adds the GST at the end on the invoice total, then that does create a problem for our business that is not GST registered. Taking the supplier to court over this is not an option for most people, so we have to deal with it ourselves.

hineshouse, I have been able to work around this issue by using the discount field. On your Purchase Invoice line items, enter the GST exclusive price and add -15% discount (negative 15%), assuming your GST rate is 15%. That seems to work fine as a workaround.

Yes I did, the first post started off being about how a “non GST” registered business wanted to produce a Purchase Order on a “GST” registered basis so (to quote the post) “that is what our supplier wants to see”.

Then the post goes on about the difficulty of processing the subsequent Purchase Invoice when (to quote the post) “as soon as we receive these items, we need to include the GST in the cost”.
Hence the implication of converting Purchase Order prices to Purchase Invoice prices.

@hineshouse, made the same linkage with the comment “am also looking at how to show the prices on my purchase order/purchase invoice the same way” Hence my response.

Your last post only refers to (clarifies) the processing of the Purchase Invoice with regards to the GST format without any reference to Purchase Orders. GST registered businesses have two legitimate presentations for Tax Invoices a) per line item (your preference) or b) per lump sum (not your preference and not illegal).

Don’t confuse the legal requirement on how to publish prices (pre sale) with the legal requirement for Tax Invoices (post sale). In fact, the majority of the GST registered businesses would prefer the lump sum approach - and so may you “if” you ever become GST registered.

As to a solution there are three options, yours with the negative discount is a perfectly acceptable one

@sloeman i had the same issue (myself not being VAT registered), i wanted to make my inventory cost prices VAT free (same as my suppliers price lists) then add their vat rate to mirror total cost and add to my total cost and not to VAT paid expence account.

I created a custom Tax code, Create a custom tax code yourself on a test business and see if it works for you.

Below is 15% tax code, click flat rate and enter effective “0%”

That makes sense, I will try that. Thanks for sharing.