Written by
Jackie Olling
Reviewed by
Key points
- GST is a 10% tax which applies to most good and services
- Consumer prices need to include the GST amount, i.e. a $40 skin cream needs to be listed as $44 to account for GST
- Quotes between businesses do not have to specify GST
Goods and Services Tax (GST)
GST is an additional 10% tax which applies to goods and services. GST is ordinarily included in invoices. However, you may be unsure as to whether your business also needs to provide it on quotes. In this article, we’ll discuss whether you’re obliged to provide GST on a quote to potential customers.
Quotes
A quote is a formal promise by a potential supplier to supply goods or services required by a buyer, at a specified price within a specified period. It usually contains the business’ ABN and their ACN, which requires you to register your company. It is different to an estimate in that acceptance of the quote by the buyer will constitute a legally binding agreement.
Business-to-Consumer (B2C)
If a business is displaying prices to consumers, the ACCC (Australian Competition & Consumer Commission) requires the quoted price to be clear, accurate and not misleading to consumers. It should state the total price of the good or service as a single figure that includes tax and other additional charges, including GST.
Example
A bottle of juice for sale in Woolworths is $4.00. It’s safe to assume that this price includes the 10% GST markup. The juice on its would cost $3.64, but with the addition of the 10% GST it is sold to customers for $4.00. If Woolworths were to display the $3.64 price, they would be breaking the law.
The ACCC requires that businesses include any taxes in the priced displayed on products. This includes GST, which you cannot exclude and add to the price later. Businesses must ensure that they do not mislead consumers by misquoting the price.
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Previous requirements
Previously, businesses could quote prices without GST included. This was on the condition that there was clear and unmistakable notice that GST would be applicable on top of the quoted price.
Example pre-2009
‘$500 plus GST’ or ‘$500 (not including GST)’.
You can no longer quote prices this way, as legislation been passed which requires that businesses have ‘all inclusive’ quotes. Many quotes breakdown the prices so consumers can see what the product costs on its own and the GST, however the total price will include GST.
Current example
You can no longer quote in terms such as ‘$500 plus GST’ or ‘$500 (not including GST). Your quote must include a total price, such as ‘$550’ or ‘$500 plus $50 (GST) = $550.00’
Business-to-Business (B2B)
For business-to-business transactions, the rules are slightly different. GST does not have to be included if the quote is made exclusively to businesses. Therefore, the general rule for B2B transactions is that no GST is required to be specified in a quote.
Example
If a business decides to sell a product to another business, then it will be legal for them to quote sans GST. An example of this would be “$295 plus GST”.
However, if you wish to provide a quote without GST, conditions do apply.
Conditions
- The quote must be exclusive to businesses. For example, even if a company is quoting towards businesses on web sites or advertisements, these publications are open to viewing for public individuals as well as corporations. Therefore it is not exclusive to businesses and businesses will be required to quote a GST-inclusive price.
- Businesses are still obliged to make it clear that the price being quoted is on a GST-exclusive. For example, a business that quotes “$295” to another business will still breach the ACCC requirements. There must be reasonable notice given that the price does not include GST.
- The B2B exception cannot be relied upon as applying to all business dealings as many businesses do not operate under a corporate structure. For example, if a business does not structure itself as a partnership, sole trader or corporation, the business-to-business exception will not apply and businesses will still be required to quote GST-inclusive prices.
If your business is sending a quote to another business, it can be advantageous to quote a GST-exclusive price. Ensure you follow the above conditions when doing so as penalties can be severe. It will also be legal to exempt your business from the ACCC GST-inclusive rule when quoting to businesses.
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