Most people have this misconception that so long as this
business doesn't charge GST, they won't be paying GST for their
purchases.
This thought is WRONG.
A GST registered business is able to charge GST (Output Tax) for
their Sales and get refund GST (Input Tax) for what they paid
for.
A Non-GST registered business is NOT able to charge GST and NOT
able to get refund GST.
Example 1:
In this example all are GST registered business except the
Consumer.
[M]anufacturer ---> [W]holesaler ---> [R]etailer --->
[C]onsumer
Sequence of events: Manufacturer sells to Wholesaler sells to
Retailer, then Consumer. (Say they are in the furniture
business)
-------Sales----Input Tax---Output Tax
[M]---$100----$0------------$5
[W]---$200----$5-----------$10
[R]----$300----$10---------$15
[C]----$315
All the GST charged refundable, except the final GST paid by
consumer, being
$15.
Example 2:
All scenario the same except that [R]etailer is NOT GST registered
business.
Therefore [R]etailer can't charge (Output Tax) GST or get refunds
(Input Tax) for GST paid.
-------Sales----Input Tax----Output Tax
[M]---$100-----$0------------$5
[W]---$200-----$5-----------$10
[R]----$300-----$10----------$0
[C]----$310 and above
The Retailer ends up paying $10 of GST but is not able to get a
refund for it.
So ultimately he will sell his goods above $310. But with all the
other GST
(utilities, petrol, rental, advertising, etc) he has to pay to
bring the final
product to you, the final cost you have to pay for GST is
definitely way
above $10.
EVEN IF YOU BUY FROM NON-GST REGISTERED BUSINESS, YOU WILL
STILL BE PAYING GST, BUT IT IS HIDDEN IN THE COST WHICH DOESN'T
SHOW UP IN YOUR RECEIPT.
