GST Can Apply to “No-Shows”
Note: The following case is important for any businesses that collect money to “supply” something, but that supply doesn’t actually take place. If they keep the money, they may still have a GST liability . . .
The High Court has held that Qantas was liable for GST in respect of payments it received for airfares that were non-refundable (or refundable but unclaimed), even if the customer failed to take the purchased flight, as the airline had still made “a supply for consideration”.
Qantas contended that GST was not payable on the unused fares, because there was only one projected “taxable supply” to prospective passengers (namely the supply of air travel) which did not come to pass, and that therefore the GST which had been paid on them should be refunded by the ATO.
However, after considering the actual contractual terms regarding reservations of flights, the Court concluded that Qantas had at least supplied “a promise to use best endeavours to carry the passenger and baggage, having regard to the circumstances of the business operations of the airline. This was a “taxable supply” for which the consideration, being the fare, was received.” Therefore, Qantas was liable for the GST.