• Account for GST on a rebate that is a payment for a separate sale

    Suppliers

    If you receive services from a purchaser and you give them a rebate for their services, you are making a purchase and the rebate is a payment for the services sold to you.

    You may be entitled to claim a GST credit on purchasing the services. Generally, you must hold a tax invoice for the purchase before you can claim a GST credit.

    Purchasers

    If you provide services to your supplier and they give you a rebate as payment for your services, then you are making a sale and must pay GST on that sale.

    Generally, you must issue a tax invoice within 28 days after the purchaser of your services (in this case your supplier) requests it.

    Example – Accounting for GST on a rebate

    BSJ Pty Ltd, under the terms of their contract, agrees to pay Jo Jo's Supermarket a rebate of $550 for promoting its soft drink products.

    Jo Jo's must promote BSJ's soft drink products by:

    • displaying these products in a prominent position
    • advertising the products.

    Jo Jo's promotional activities are a separate sale of services to BSJ in exchange for the $550 rebate. As such, the rebate does not reduce the price of the soft drink products sold to Jo Jo's but is a payment for a separate sale Jo Jo's made to BSJ.

    How BSJ accounts for GST

    BSJ is entitled to $50 GST credit ($550   1/11) for the promotional services it purchased from Jo Jo's, provided it holds a tax invoice at the time of the claim.

    How Jo Jo accounts for GST

    Jo Jo's is liable to pay $50 GST ($550   1/11) for the promotional services it sold to BSJ.

    Jo Jo's must provide a tax invoice to BSJ for this sale within 28 days of BSJ requesting it.

    End of example
      Last modified: 22 May 2014QC 16694