WEDNESDAY, 21 May 2008 - All businesses that take deposits for goods and services will be eagerly awaiting the first GST High Court case expected to be handed down tomorrow according to Deloitte Indirect Tax Partner Andrew Nutman.

The case involving Reliance Carpets vs the Commissioner of Taxation, explores one of the fundamental cornerstones of the GST law, of what is and what is not a supply for GST purposes,” Mr Nutman said.

“Currently, business pays one 11th of any forfeited deposit to the Tax Office but this case challenges whether the ATO should receive the money.

“If the Commissioner’s appeal is unsuccessful, this would open up the door for significant retrospective claims which could be up to $1 billion with the most impact to be seen on businesses in the property, tourism and large goods retail sectors.”

Following unsuccessful attempts in the Administrative Appeals tribunal and the Full Federal Court, the Commissioner of Taxation was granted special leave to appeal the case in the High Court.

“If Reliance Carpets are successful, businesses will be able to claim back all of the amounts of GST paid to the ATO on forfeited deposits (one 11th) dating back to the introduction of the new tax system in 2000.

“This is a significant decision with significant financial impacts, depending on what the High Court decides tomorrow.

“Interestingly, the European Court of Justice made the landmark decision in July last year that business did not have to account for VAT on forfeited deposits.”

To view the Full Federal Court decision, click here.

To view the European Court of Justice decision, click here.