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Ruling

Subject: GST and the classification of water meter reading services.

Question

Are you making a taxable supply when you provide services to the Owners Corporation to read the individual water meter of each unit in a strata complex?

Answer

Yes, you are making a taxable supply when you provide your services to the Owners Corporation to read the individual water meters of the individual strata unit's owners.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You, manage and maintain various properties for various Owners Corporations. You are registered for GST.

The buildings associated with these strata plans have a single water meter at the exterior of the property and individual water meters installed for individual lots within the strata titled property. These individual meters are within the boundaries of the buildings and are not read by the Government water supplier.

The Government water supplier reads the external main water meter and issues an account quarterly to the Owners Corporations. The account from the Government water supplier to the Owners Corporations does not include GST.

You supply a service to the Owners Corporations of reading each internal water meter and that service attracts a fee for the service. The parties to the agreement are yourself and the Owners Corporations. You attend each site and read the individual water meter for each individual unit. You then calculate each unit holder's share of water usage and issue an invoice to each unit holder on behalf of the Owners Corporation.

You have classified the meter reading services as taxable supplies and this is invoiced to the Owners Corporation as a bulk invoice. You receive a fee for the collection and billing service that you provide to the Owners Corporation.

You advised that it is the Owners Corporation that bears the commercial risk for the supply, for example where an owner defaults on payment.

A sample of the agreement is provided. It states:

All fees payable under the agreement are INCLUSIVE of GST refers to Clause X of the agreement.

We have outlined Clause X.

Contentions:

You have been advised by the Executive Committee of one of your buildings under management that based on paragraph 24 in the Goods and Services Tax Ruling: GSTR 2000/25 GST free supplies of water, sewerage and sewage like services, storm water draining services and emptying of a septic tank (GSTR 2000/25) the charge for the service of reading the water meters should be GST free.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Division 38

A New Tax System (Goods and Services Tax) Act 1999 Section 38-285

A New Tax System (Goods and Services Tax) Act 1999 Division 40

Reasons for decision

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable supply if:

(a) you make the supply for consideration,

(b) the supply is made in the course or furtherance of an enterprise that you carry on

(c) the supply is connected with Australia, and

(d) you are registered or required to be registered,

However the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Your service is for consideration as the Owners Corporations provide you with a fee for your service. Your service is provided in the course of your enterprise. Furthermore, your supply of meter reading services is done in Australia and you are registered for GST. Accordingly, your service of reading the individual water meter for each unit for the Owners Corporations meets the requirements of paragraphs (a) to (d) of the definition of a taxable supply in section 9-5 of the GST Act.

In addition the service of reading a water meter is not listed as an input taxed supply under Division 40 of the GST Act therefore we will look at whether the supply of this service is GST free.

A supply of goods or services will be GST-free if it is provided for in Division 38 of the GST Act or made so under another Act.

Section 38-285 of the GST Act deals with the supply of water and sewerage. As pointed out in your application the public ruling Goods and Services Tax Ruling: GSTR 2000/25 GST free supplies of water, sewerage and sewage like services, storm water draining services and emptying of a septic tank (GSTR 2000/25) provides guidance in relation to supplies of water.

Section 38-285 provides that:

(1) A supply of water is GST-free.

(2) However, a supply of water is not GST-free under this section if it is:

(a) supplied in a container; or

(b) transferred into a container;

that has a capacity of less than 100 litres or such other quantity as the regulations specify.

(3) It does not matter whether or not the amount of water supplied or transferred fills the container.

GSTR2000/25 provides at paragraphs 22 and 23 a discussion of what it means to supply water. These paragraphs are reproduced below.

22. In an urban environment, the delivery of water may occur through reticulated pipes that provide a continuously available supply of water at adequate pressure. It may also occur through other means, such as by access to natural watercourses and aquifers, access to canal and channel systems, or by delivery by road vehicle to the storage facility of recipients not serviced by reticulated pipes. Access to water systems can be provided by the opening of an outlet to obtain irrigation water or by pumping water from a dam directly into a recipient's premises.

23. A supply of water to an end recipient through reticulated pipes is made at that part of the recipient's premises where the supplier's responsibility for the supply ceases. This is the point of supply to end recipients. In an urban environment, a supplier's responsibility for the supply of water usually ceases at the water meter, a property boundary or a point close to a property boundary. For end recipients receiving water through a canal and channel system, a supplier's responsibility usually ceases at that part of the system where the flow of water is physically regulated or timed by the supplier, for example, at an irrigation outlet. Appendix 1 shows a schematic view of how water may be delivered.

In this case the Government water supplier makes the supply of water and their responsibility for that supply continues up to the single exterior water meter of the property. Therefore you are not the supplier of the water.

In addition paragraph 24 of GSTR 2000/25 provides guidance on various activities performed by the supplier and the GST status of these supplies. It provides that:

24. Activities performed by the supplier of water up to and including the point of supply to the recipient of water are GST-free if they are integral to the physical delivery of water to the recipient. The system for the physical delivery of water to an end recipient may be the responsibility of more than one supplier of water. For example, a supplier of bulk water may supply bulk water to another supplier who makes retail supplies of water to end recipients. The following will be GST-free:

§ initial connection, re-connection, disconnection, water meter installation, and tapping and tee insertion;

§ irrigation channel water scheduling and channel attendance (including channeling from natural water courses);

§ irrigation channel maintenance up to and including the point of supply (where it is charged to the water supply recipient); and

§ water meter reading and testing.

As can be seen from Paragraph 24 where the meter reading is done by the supplier the supply is GST free. However, supplies of services such as meter reading done by an entity such as yourself who is not the supplier of the water will not be GST-free.

Therefore, as your supply of meter reading services meets the positive conditions of section 9-5 of the GST Act and is not excluded by the negative limbs, your meter reading services will not be GST-free but a taxable supply.

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