A company that claimed it operated a precious metal refinery, Very Important Business (VIB), had tried to claim input tax credits for the last quarter of 2015 for the purchases of scrap gold.
VIB also claimed its subsequent supplies of precious metal to so-called dealers in precious metal were GST-free supplies.
However, the ATO disputed this, arguing that VIB had no evidence to satisfy the meaning of creditable acquisition in the GST Act, and that it had not held tax invoices in the quarterly tax period and, therefore, could not attribute its input tax credits to that period.
In relation to certain acquisitions of scrap gold supposedly made by VIB from unregistered suppliers, the commissioner submitted that VIB was not entitled to claim input tax credits under the second-hand goods rules in the GST Act because it did not satisfy the requisite test.
The AAT affirmed the ATO’s decision, concluding that VIB was not a refiner within that quarterly tax period because its director, who was integral to the refining operations, was not attending and overseeing the refinery on a regular basis, thus failing to meet the definition of a refiner of precious metal which includes regularly refining or converting metal.
As it was not a refiner of precious metal, it was not able to make GST-free supplies of precious metal.
The AAT also said VIB did not satisfy that it had financial capacity to make the acquisitions of scrap metal, and additionally did not hold valid tax invoices, hence not being entitled to claim any input tax credits on scrap gold that was allegedly acquired.
ATO deputy commissioner Jeremy Geale, speaking after the appeal period closed, said the case forms an important part of the ATO’s ongoing compliance activities in the precious metals industry.
“We welcome the decision of the AAT. We have been working hard to protect honest businesses in the precious metals industry by tackling the significant non-compliance of some participants who have been incorrectly claiming GST refunds,” Mr Geale said.
The case follows two other recent AAT decisions concerning GST that have affirmed the commissioner’s decision to disallow input tax credits claimed by precious metal industry participants.
“These are complex cases that require difficult and lengthy investigative work. This decision, along with the two earlier decisions, should provide the community reassurance that the ATO is doing the work that is needed in this industry to address significant non-compliance,” Mr Geale said.
“We will continue to work hard to ensure that the GST system is not being used inappropriately in any industry. Where widespread concerns are raised and significant risks are identified, we will commit resources and our broad range of investigative techniques to ensure a level-playing field for all participants.”