First check the ABN and business name registration on ABN Lookup. More than likely the supplier is not registered for GST or has given you an unrelated ABN, and is trying to pocket the GST amount through rather disingenuous means!
If it turns out that the supplier IS in fact registered for GST, then you could pay the ATO directly—but only if you see ATO paperwork that includes convincing evidence that indicates you are actually paying into the Integrated Client Account, for that entity’s ABN.
But you have to ask…why would a business agree to do this for a supplier? Perhaps the supplier is an important and trusted one and is struggling with cashflow and asks you to do this as a favour—okay—assuming you see the above mentioned paperwork.
The responsibility for lodging a BAS and paying the ATO rests squarely with each entity. You would want to be convinced that the supplier is actually doing the right thing with their BAS. You would not be agreeing to pay GST to the ATO on behalf of an unknown supplier, nor would you agree to this even for a known supplier if there was not convincing evidence and good reason. This will increase your administration costs—are you willing to incur this expense for another entity’s legal obligation?
Regardless of evidence or reasons provided, the business owner is under no obligation whatsoever to pay the ATO on behalf of another entity. Be suspicious!
ICB - Checking Tax Invoices and Suppliers
Edited at 20 Apr 2015 02:35 AM GMT