Issue 13 - Third party rebates
13.a. How is a cash-back paid by a car manufacturer to a customer on the purchase of a car treated for GST?
For source of ATO view, refer to paragraphs 40 to 42C of GSTR 2000/19External Link - Goods and services tax: making adjustments under division 19 for adjustment events.
Where a customer purchases a car from a dealer and subsequently receives a cash-back payment from the manufacturer, the payment by the manufacturer is not an adjustment event as it does not alter the consideration on the supply of the car between the manufacturer and the dealer or the supply between the dealer and the customer.
However, a third party payment such as a cash-back may result in an adjustment under division 134 of the GST Act. Division 134 only apply if third party payment is made on or after 1 July 2010.
A manufacturer registered for GST remits GST based on the price for which it sells the car, however, under division 134, may be entitled to a decreasing adjustment, as if the consideration for the manufacturer's taxable supply of the car to the dealer had been reduced by the amount of the third party payment. A customer registered for GST may be subject to an increasing adjustment under division 134, as if the consideration for the customer's acquisition of a taxable supply of the car by the dealer had been reduced by the amount of the payment.
In order for a manufacturer to be entitled to a decreasing adjustment under division 134, it is a requirement that the third party payment is not consideration for a supply made to the manufacturer (paragraph 134-5(1)(e) of the GST Act. In order for division 134 to impose an increasing adjustment on a customer, it is a requirement that the third party payment is not consideration for a supply from the customer (paragraph 134-10(1)(e) of the GST Act).