GST Q&A – GST on Grants received from other Government Bodies
Application of GST to grants received from other Government Bodies.
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Can you please clarify if we should be remitting GST on Grants received from other Government Bodies? Alternatively, should they be treated individually based on the purpose of the Grant?
Each grant would need to be treated separately. However, we observe that payments between two government entities may either be:
- grants; or
- payments for a supply.
In this regard we note:
- for grants, the issue is whether Council is making a supply that has sufficient nexus to the payment being received from the other Government Department; and
- for payments for a supply between government related entities, the issue is whether the conditions in section 9-17(3) of the GST law are met.
If there is insufficient nexus between the payment and any supply made, then the transaction is not a taxable supply. See GSTR 2012/2 on grants of financial assistance.
If there is sufficient nexus between the payment and any supply made, then the transaction would ordinarily be a taxable supply. However, it will not be a taxable supply where the conditions of section 9-17(3) are met. These conditions essentially provide that if the payment is:
- made by a government related entity (e.g. a Department) to another government related (e.g. a Council) entity for making a supply;
- the payment is paid under a government appropriation (or pursuant to specified intergovernmental health reform arrangements); and
- the payment satisfies a non-commercial test (essentially that the amount paid is no more than the cost to make the underlying supplies),
then the payment is not treated as consideration for a supply.
Disclaimer: This article is based upon information available as at the time of publishing and may be subject to change.