GST Clauses: Recovering GST
Onus on supplier to recover GST
If GST is payable on the transaction, but has not been provided for in some way in the contract, the supplier may find itself liable to account for the GST without any legal right of recovery from the customer. In this respect, the risk lies on the supplier to:
Some typical ways in which GST is provided for in contracts are as follows:
Example: In September 1999 a fitness club enters into a 12-month contract with a customer. The contract is made after 8 July 1999 and is therefore not entitled to the benefit of the concessions noted. The contract will be treated as a periodic or progressive contract, so the proportion of the contract fee that relates to the period after 30 June 2000 will be subject to GST. If the fitness club has not provided in the contract for the price to include the GST or provided for it in some way, it will be liable to fund the GST itself. As it does not have any right of recovery from the customer, it may have to request the customer to contribute an additional amount to cover the GST. If this is not successful, the fitness club may have to absorb the payment.
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