ATO Interpretative Decision

ATO ID 2004/396 (Withdrawn)

Goods and Services Tax

• This ATO ID is withdrawn as it is superseded by the 'GST and cars purchased by eligible people with disabilities' fact sheet (NAT 4325).
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, a motor vehicle repairer, making a mixed supply that is partly a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and partly a GST-free supply under subsection 38-510(4) of the GST Act, when it supplies a set of disc brake pads to an eligible disabled person and fits the disc brake pads to the eligible disabled person's car?

Decision

Yes, the entity is making a mixed supply that is partly a taxable supply under section 9-5 of the GST Act and partly a GST-free supply under subsection 38-510(4) of the GST Act. The fitting of the set of disc brake pads, being the supply of labour, is a taxable supply. The supply of the set of disc brake pads is a GST-free supply.

Facts

The entity is a motor vehicle repairer. The entity supplies a set of disc brake pads for the car of an eligible disabled person. This supply includes the supply of the disc brake pads to the eligible disabled person and the fitting of the disc brake pads to the eligible disabled person's car. The fitting of the disc brake pads requires a substantial amount of labour costs and time.

The eligible disabled person meets the requirements of paragraphs 38-510(1)(a) and 38-510(1)(b) of the GST Act.

The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for Decision

Section 9-5 of the GST Act provides that an entity makes a taxable supply when the requirements in that section are met. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.

Under subsection 38-510(4) of the GST Act, a supply of car parts that are for a car for an individual who meets the requirements in paragraphs 38-510(1)(a) and 38-510(1)(b) of the GST Act, is GST free.

The entity supplies a set of disc brake pads for the eligible disabled person's car. The disabled person meets the requirements of paragraphs 38-510(1)(a) and 38-510(1)(b) of the GST Act. The disc brake pads are car parts, and therefore, the supply of the disc brake pads is GST-free under subsection 38-510(4) of the GST Act. However, although the supply of the set of disc brake pads by itself is a GST-free supply, it needs to be determined whether the fitting of the disc brake pads forms part of the supply of the disc brake pads or is a separate supply.

Goods and Services Tax Ruling GSTR 2001/8 provides guidance on composite and mixed supplies by describing the characteristics of supplies that contain taxable and non-taxable parts (mixed supplies) and the characteristics of supplies that appear to have more than one part but are essentially supplies of one thing (composite supplies).

Paragraphs 16 and 17 of GSTR 2001/8 state:

16. A mixed supply is a supply that has to be separated or unbundled as it contains separately identifiable taxable and non-taxable parts that need to be individually recognised...

17. If you make a supply that contains a dominant part and the supply includes something that is integral, ancillary or incidental to that part, then the supply is composite. You treat a composite supply as a supply of a single thing...

Whether a particular part of a supply is integral, ancillary or incidental in relation to the whole supply is a question of fact and degree.

Each part of the entity's supply has significant value, as a substantial amount of labour costs and time are needed to fit the disc brake pads to the car. Each part is significant enough in its own right to be regarded as separately identifiable parts and not as integral, ancillary nor incidental to each other. As such, the supply of labour is separately identifiable to the supply of the set of disc brake pads and its GST status must be considered separately to the supply of the disc brake pads. The supply of labour is not covered by subsection 38-510(4) of the GST Act or any other provision in Division 38 of the GST Act or Division 40 of the GST Act. The entity is registered for GST and the supply of labour satisfies the other positive limbs of section 9-5 of the GST Act. Therefore, the entity's supply of labour is a taxable supply.

As such, the entity is making a mixed supply that is partly a taxable supply under section 9-5 of the GST Act and partly a GST-free supply under subsection 38-510(4) of the GST Act.

(Price of the supply * 10) / (10 + Taxable proportion)


where: 'taxable proportion' is the proportion of the value of the actual supply that represents the value of the taxable supply (expressed as a number between 0 and 1) (see subsection 9-80(2) of the GST Act).

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   subsection 9-80(2)
   Division 38
   section 38-505
   paragraph 38-510(1)(a)
   paragraph 38-510(1)(b)
   subsection 38-510(4)
   Division 40

Related Public Rulings (including Determinations)
Goods and Services Tax Ruling GSTR 2001/8

Related ATO Interpretative Decisions
ATO ID 2004/397

Other References:
Cars and the GST - purchase by eligible people with disabilities Fact Sheet - NAT 4325

Keywords
Goods and services tax
GST free
Cars for disabled veterans
Cars for other disabled people
GST supplies & acquisitions
GST supply
Taxable supply

Business Line:  GST

Date of publication:  7 May 2004

ISSN: 1445-2782