Taxation and Capital Gain Tax

TAXATION 1
TAXATION
Name
Institution
Date

TAXATION 2
Question 1.
The fact that City Sky is a property investment and development company, it is by law required
to be registered for GST because it is involved in buying property, redevelop and sell them. Tax
credit is fundamentally a core aspect for GST and it is also a major concern for tax registered
companies most importantly it is a good deal for people who buy goods for resale. A real estate
developer who needs to first purchase land for apartment development is bound to pay GST not
directly to the Australian Taxation Office but through the seller. At the time of land sell, the
seller is charged a GST and the seller includes it in the invoice he gives to the buyer and in this
case it is the City Sky Co. Therefore, it is entitled to an input tax credit because the purchased
land for commercial purposes- building apartments which will be sold to clients.
According to Bennett, and Chiert, (2018) of KPMG Australia, the GST laws changed beginning
from 1st July 2018 and that the buyer is taxed with obligation of withholding the GST imposed
on the purchase of vacant land. Therefore City Sky has the obligation to withhold the tax payable
on the purchase of the vacant land. The law changed as there were many loopholes in the
payment of the GST. It is evident that one would not know whether the vendor pays the GST to
the relevant authorities or not.
In Brisbane some companies have been summoned over fake ITC claims. The government was
very much concerned with whether the taxes were paid . "Effectively, while a business may have
paid the tax to a vendor for which it wants to claim credit, it may not be possible to ascertain if
the vendor has deposited the GST" (Sikarwar, 2019). From Sikarwar article, it clear that some
vendors did not pay the GST tax as required of them by law. But "GST law warrants a reversal
of input tax credit claimed by a business if its vendor has not paid the tax for which credit is
being claimed." So is from this law that many have beaten the system are evading taxes while the

TAXATION 3
buyers are not aware. The buyers unsuspectingly fill the tax returns claiming the credits. There
has been no mechanism to verify whether the vender paid the GST or not. The system or the
portal only captures whether the vendor included the tax in his or her invoice but does not
ascertain whether the vendor deposited the money for GST Sikarwar, (2019). Continues to
propose that there is no fairness when the buyers are bounced on their claims yet they did their
due diligence and paid the tax.
To claim the input tax credit the company is required to fulfill some conditions among them
which include; being a registered taxable person which is the case with our company City Sky.
The company should receive goods and services for business transactions and in this case the
land was purchased for developing apartments. The person claiming the input tax credit can
credit the ITC in their Electronic Credit Ledger on the portal as described in the GST law.
Various documents such as tax invoice are necessary to claim the ITC. It can also be claimed if
there is an actual receipt of the goods and filling all the GST returns like GST-1 up to GST-7.
How Input Tax Works under GST
The seller sold land City Sky Co bought. City Sky is now entitled to claim the input tax credit
using the purchase invoice he got from the seller. The seller would be required to upload her tax
invoice details as directed by the GSTR-1 and what detail was on the invoice is reflected in the
GSTR-2A. It is this same details that will reflect when City Sky files the GSTR-2 returns and it
will be typically the details of purchase. Then the tax authority accepts and acknowledges the
requests for City Sky and after that process, the tax credit is credited to the City Sky account.
There have been serious debates between the real estate developers and the authorities on
whether there should be Input tax credit or there shouldn't. Some developers argue that the tax