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Edited version of private ruling
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Ruling
Subject: GST and rebate
Question
Is the rebate paid by the government entity to you consideration for your supply and installation of equipment to your customers?
Answer
Yes, the rebate paid by the government entity to you is consideration for your supply and installation of equipment to your customers.
Relevant facts and circumstances
You are a supplier and installer of equipment.
You are registered for goods and services tax (GST).
Your customers are entitled to a rebate paid by the government entity under a government programme (the programme).
When your customers agree that the rebate from the government entity be paid to you, they only pay the price for the supply and installation of the equipment less the amount of rebate.
You provided us with a copy of a claim form which your customers sign to claim the rebate and allow the rebate to be paid to you.
The claim form requires your customers (referred to in the form as the applicants) to include an itemised tax invoice for the equipment and labour in sending the claim form.
You create a dummy tax invoice for the supply and installation of the equipment showing the price for the equipment and labour. You send this dummy tax invoice to the government entity for the purpose of claiming the rebate.
You give your customers a tax invoice but only for the amount they pay rather than for the total price of the supply and installation of the equipment.
Reasons for decision
GST is payable on taxable supplies. A supply is a taxable supply if the requirements in section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are met.
Under section 9-5 of the GST Act, you make a taxable supply if:
(a) you make the supply for consideration; and
(b) the supply is made in the course or furtherance of an enterprise you carry on; and
(c) the supply is connected with Australia; and
(d) you are registered or required to be registered.
However, a supply is not a taxable supply if it is GST-free or input taxed.
For the purpose of paragraph 9-5(a) of the GST Act, there must be a sufficient nexus between a particular supply and a particular payment, which is provided for that supply, for there to be a supply for consideration.
Consideration is defined in section 9-15 of the GST Act to include any payment, or any act or forbearance, in connection with a supply of anything. It does not matter whether the payment, act or forbearance was voluntary, or whether it was by the recipient of the supply.
In your case, you supply and install equipment for customers who are entitled to the rebate. Your customers allow you, in signing the claim form, to receive the rebate. When they do so, the amount that they pay for the supply and installation of the equipment is reduced by the amount of the rebate.
In determining whether the rebate is consideration for the supply and installation of the equipment, we take the view that:
· the test is whether there is sufficient nexus between the supply and the rebate;
· regards need to be had to the true character of the transaction; and
· the arrangement will be characterised not merely by the description given to the arrangement but by looking at the circumstances in which the transaction is made.
The sufficient nexus test will also determine whether the rebate is:
· consideration for a supply made to the government entity,
· not consideration for a supply; or
· consideration for a supply but the government entity is not the recipient of that supply.
The government entity published a document containing the guidelines for residential applicants as regards the programme.
Based on the guidelines, the rebate is paid when the equipment is installed. Your customers, and not the government entity, contract you to supply and install the equipment. The guidelines do not indicate that you make any supply to the government entity. As such, the rebate is not consideration for a supply that you make to the government entity.
When your customers contract you to supply and install the equipment, they are liable to pay for the equipment and labour in relation to the supply and installation. They use the rebate to discharge part of that liability to you. When they allow you to receive the rebate by indicating in the claim form, the government entity becomes a third party payer. That is, the government entity makes a payment for a supply but the government entity is not the recipient of that supply.
The rebate has sufficient nexus to the supply and installation of the equipment. Accordingly, the rebate is consideration for your supply and installation of the equipment to your customers.
As the rebate is consideration for your supply and installation of the equipment to your customers, you are also liable to remit 1/11th of the rebates that you receive from the government entity and not only of the payments made to you by your customers.
Goods and Services Tax Ruling GSTR 2006/9 'Goods and services tax: supplies' discusses propositions which apply to analysing multi-party arrangements. Paragraphs 182-216 of GSTR 2006/9 provide examples of arrangements that are similar to your circumstances. GSTR 2006/9 is available from the ATO website for your reference.
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