The federal government on Friday warned businesses to refrain from applying the GST on top of the fixed-priced carbon tax following news reports that the goods and services charges would be included on customer bills.

"The GST does not apply to the carbon price, it applies to the supply of goods and services," said a joint statement issued today by Climate Change Minister Greg Combet and Assistant Treasurer David Bradbury.

The questionable practice would only invite trouble for erring business establishments, the two government officials said, such as the case of waste disposal firm J.J. Richards, which is now the subject of a probe by the Australian Competition and Consumer Commission (ACCC).

According to the Australian Associated Press (AAP), the company had issued advisories to its customers that the $23 per tonne carbon tax will come with the GST charge, leading to a total tax cost of $25.30.

What happened was not what the laws have intended and "any business jacking up their prices and falsely blaming the carbon price could be liable for fines of up to $1.1 million," the government said.

The two ministers explained that amendments have been applied to specifically stressed on that "the carbon price does not change how the GST operates."

The clarification was in reaction to reports by News Ltd publications that said air conditioning firms, data contractors and waste firms would apply the GST with the new tax that was introduced this July.

The same report also claimed confirmations coming from electric companies in New South Wales that another 10 percent of the GST will be added to the carbon tax in accounting for a customer's total monthly bill.

All the confusion, according to Shadow Treasurer Joe Hockey, only proved the inefficiency of the carbon tax introduced by the Labor government.

The brewing trouble reminded him of the 'taxes on taxes scenario' that was seen in the concealed wholesale taxes slapped on customers prior to the introduction of the GST by the Liberal Howard Government, Mr Hockey said.

Simply put, it was messy economics, he stressed.

"The best way to get efficiency in the economy is to have only one tax on a product, not an embedded tax and then another tax on top of it which is what's happening with the carbon tax," Mr Hockey said in an interview today with Seven Network.