The obligation to quote GST and the incentive to quote the lowest GST-exclusive price can leave businesses uncertain about its inclusion in quotes.
What is a Quote?
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.
Should GST be Included in a Quote?
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.
For example, in retail stores such as Woolworths, the prices displayed on the shelves will be GST-inclusive. In alignment with the ACCC requirements, this price ensures that consumers seeking to purchase the product are not misled or deceived by misquoting the price.
Previously, it was possible for businesses to quote GST-exclusive prices on condition they included a clear and unmistakable notice that GST was to be included in addition to the quoted price. For example, if a business quoted “$295 plus GST” in an advertisement, then prior to 2009, this would have sufficed.
However, in 2008-2009, Parliament passed new legislation that ensured pricing from B2C was ‘all inclusive’ and thereby included GST. Businesses can no longer quote prices such as “$295 plus GST”. Rather, all businesses must quote total prices, such as “$324.50” ($295 + 10% GST), to all consumers.
Though the ACCC requirement for a clear, accurate and not misleading quote is apparent for B2B transactions, the rule requiring GST-inclusive prices does not apply if the price statement is made exclusively to businesses. Therefore, the general rule for B2B transactions is that no GST is required to be specified in a quote.
For example, if a business decides to sell a product to another business, then it will be legal for them to quote on a GST-exclusive basis, such as “$295 plus GST”. There are a few conditions attached to being able to quote without specifying GST:
- 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 (up to $1.1 million per offence). It will also be legal to exempt your business from the ACCC GST-inclusive rule when quoting to businesses.
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