Taxation Theory, Practice, and Law: Input Tax Credit Mechanism and Capital Gains Tax

Running head: QUESTIONS 0
TAXATION THEORY, PRACTICE, AND LAW
SEPTEMBER 21, 2019
STUDENT DETAILS:

QUESTIONS 1
Question 1:
For avoiding the ‘tax on tax’, the input Tax Credit mechanism was integrated in Goods and
Service tax system. For claiming the input tax credit, it is required to fulfil all the conditions
stated in the section 16 of the Central Goods and Service tax Act (Wilkins, 2015). The supplier
of services or goods requires following conditions
1. At first, it is required to be registered in the Goods and law.
2. Afterwards, it is required to have tax invoice or debit note provided by a dealer of the
input services as well as input.
3. It is also required to get goods, services, or both.
4. Moreover, the inputs supplier should have paid the government good and service tax
charged in relation to this supply.
5. It is also required to file the return under section 39.
6. In case of receiving the goods in the instalment or in lot, one may claim input tax credit
while last lot is attained.
7. In case of claiming, the depreciation on tax portion of a cost of the capital good, then it is
not possible to avail the ITC on tax components.
8. It is also not required to be entitled to have input tax credit, when it is not claimed in a
specified period (Dixon and Nassios, 2016).

QUESTIONS 2
In the given case study, City Sky Co is a registered corporation. In this way, City Sky Co would
be eligible to avail the input tax credit where it is applicable. The corporation has bought the
vacant land’s part south of Brisbane as well as this is planning to create fifteen apartments for
selling.The land comes under the immovable property. In this way, the land is neither service nor
good. In this way, the land is not covered in the ambit of the Goods and Service tax. The
unoccupied land is also known as capital asset. Because it covers under capital asset, it is eligible
for capital gains tax. Henceforth, Good and Service tax cannot be applicable on the vacant land.
Furthermore, City Sky Co is planning to build the apartment on vacant land, this would under the
provisions of black credit (the services and goods taken by the taxable individual to construct the
immovable property whether on the own account or in a course or the persistence of the business
is not eligible for theITC). Henceforth, the input tax credit is not entitled for this (Huizinga,
Voget and Wagner, 2018).
In addition, the company has undertaken the development services of 33,000 dollars from the
lawyer of local area. These services undertaken from an advocate come under reverse charge
method. A reverse charge is the mechanism wherever the recipient of the services and goods is
accountable for paying the GST. Within reverse charge mechanism, a supplier of the services
and goods is not liable to pay the Goods and Services tax. As per reverse charge mechanism, the
GST is required to pay by receiver of products and services. Therefore, if anyone is the recipient
of the services as well as goods in the reverse charge, then it is required to remit just the payment
of the purchase to the supplier. As for Goods and Service Tax, in the capacity of recipient, it is
required to the deposit tax in a direct manner with the relevant tax authority. The mechanism of
tax collection is aimed at decreasing the evasion of tax, mainly from the disorganised sector.
Further, if a person is the recipient and isaccountable for paying the tax on reverse charge

QUESTIONS 3
mechanism, in that case one can claim ITC for paid tax. On other hand, this may be claimed only
if these services and goods are or would be utilised for the business. The people who are required
to make the payment of tax under reverse charge mechanism, has to compulsorily register under
the Goods and Service tax. Therefore, the reverse charge mechanism needs the registered
recipient of the services as well as goods to remit the tax to the authorities in a direct way if-
– performing with unregistered dealer, or
– buying the particular listed services along with goods
Since the City Sky Co is Development Corporation, then the lawyer’s services are utilised for the
business purpose only, henceforth this is eligible for the input tax credit of Good and Service Tax
paid on the service availed from Maurice Blackburn (lawyer). In addition, the revenue of the
lawyer is stated in a question; however, this is not relevant for an organisation to have the ITC on
service related to a development. As per above analysis, it can be concluded that City Sky Co
can have the ITC for a tax paid on service availed from lawyers for development service.
Question 2:
It is provided that Emma has given the listing of the transactions undertaken by her through the
financial year to making help in completing the income tax return 2015.The capital gain tax takes
place while the sale price taken from disposing of asset is greater than the buying price. It is
that tax levied on the profitgenerated profit from the sales (Kouparitsas, Prihardini and Beames,
2016). On the other hand, there is a trick, which may be employed to the lower the capital gain
tax levied. Capital gains tax is tax upon profits realized on non-inventories asset’s sale. If
possible, a capital gain tax is applied upon a company or individual that takes decision for selling
the profits for assets. The only exception is for day traders that involve in the trading or