In a recent case the Federal Full Bench had to consider whether or not GST was still applicable where a customer bought an airline ticket but subsequently cancels the booking, or does not turn up for the flight, and does not receive a refund either because, under the terms of the contract, no refund was available or, although it was available, it was simply not claimed.
The Administrative Appeals Tribunal had held that the airline still had to account for the GST.
On general principles, GST should not be applicable in such circumstances because the airline has not made any taxable supply to the customer. All that has occurred is that a booking has been made and paid for but the supply of the air journey for which the booking was made has not taken place.
The Full Bench identified that at the heart of taxpayer’s case was the simple proposition that the air journey was the supply that was the contemplation of the parties but that in fact that supply did not occur and therefore there was no GST liability ever triggered.
The Court held that it was plain that what each customer pays for is carriage by air which was the essence, and sole purpose, of the transaction. Having recognised the actual carriage by air had not been supplied, and that was the purpose of the booking, that was the end of the inquiry. The actual travel was the relevant supply, and if it did not occur there was no taxable supply. Therefore there was no GST applicable.
This is an important decision for entities which take bookings for supplies which eventually do not take place. No GST is applicable to such bookings whether or not the amount paid for the booking is returned or not.