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Ruling

Subject: GST and approval to issue recipient created tax invoices (RCTIs)

Question

Will the Commissioner exercise his discretion to allow you to issue RCTIs for the acquisition of material from different suppliers?

Decision

Yes, provided you satisfy all the requirements set out in A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoices Determination (No 29) 2000 (Determination), the Commissioner will exercise his discretion to allow you to issue RCTIs for the acquisition of scrap metal from different suppliers.

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 are registered for GST. You pick up commodities from different suppliers. These commodities are brought to your premises and weighed. You ship the collected material to manufacturers.

After weighing the material, you issue a docket to each supplier, which outlines the rates at which you will pay for the commodities. With the docket, you send a request to the supplier for an invoice for the goods supplied.

When you receive the invoice from a supplier, you send a cheque to the supplier as the payment for the supply.

Your turnover for the 2010 - 2011 financial year was about $x million.

You contend that the current procedure of issuing tax invoices and making payments is quite cumbersome. If you are permitted to issue RCTIs, the payment procedure could be streamlined and simplified.

You sent us a copy of an RCTI agreement, which you intend to enter into between you and each supplier.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 (GST Act), Section 29-70.

This ruling applies for the following periods:

Not applicable

The scheme commences on:

Not applicable

Reasons for the decision

Paragraph 29-70(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:

A tax invoice for a *taxable supply must be issued by the supplier unless it is a *recipient created tax invoice (in which case it must be issued by the *recipient);

*Denotes a term defined in section 195-1 of the GST Act.

Subsection 29-70(3) of the GST Act states:

A recipient created tax invoice is a *tax invoice belonging to a class of tax invoices that the Commissioner has determined in writing may be issued by the *recipient of a *taxable supply.

Goods and Services Tax Ruling GSTR 2000/10 - 'Goods and services tax: recipient created tax invoices' (GSTR 2000/10) outlines the circumstances under which a recipient can issue RCTIs. Paragraph 53 of GSTR 2000/10 states:

53. Industry associations, whose members are registered recipients of taxable supplies not covered by these broad classes, can request that the Commissioner make a determination in respect of other classes of tax invoices. The request will be considered on the basis of the particular circumstances of the industry, including the nature of the taxable supplies, suppliers and recipients. Other registered recipients may also make requests.

The Commissioner has issued a series of RCTI determinations to other classes of recipients. A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoices Determination (No 29) 2000 (Determination) refers to recipients of scrap metal. Clause 4 of the Determination states:

4. A scrap metal dealer who is the recipient of a taxable supply, may issue a tax invoice that belongs to a class of tax invoices for a taxable supply of scrap metal where the recipient:

(i)  establishes the value of those products after the supply is made using a qualitative or quantitative process; and

(ii)  satisfies the requirements set out in Clause 5.

Clause 5 of the Determination refers to the requirements that must be satisfied by a recipient of a taxable supply and states:

5. A recipient must satisfy the following requirements:

(a)  the recipient must be registered for GST when the invoice is issued;

(b)  the recipient must set out in the tax invoice the ABN of the supplier;

(c)  the recipient must issue the original or a copy of the tax invoice to the supplier within 28 days of making, or determining, the value of a taxable supply and must retain the original or the copy;

(d)  the recipient must issue the original or a copy of an adjustment note to the supplier within 28 days of the adjustment and must retain the original or the copy;

(e)  the recipient must reasonably comply with its obligations under the taxation laws;

(f)  the recipient must have either:

·  a written agreement with the supplier specifying the supplies to which it relates, that is current and effective when the RCTI is issued, agreeing that:

(i) the recipient can issue tax invoices in respect of the supplies;

(ii)  the supplier will not issue tax invoices in respect of the supplies;

(iii)  the supplier acknowledges that it is registered for GST when it enters into the agreement and that it will notify the recipient if it ceases to be registered;

(iv)  the recipient acknowledges that it is registered when it enters into the agreement and that it will notify the supplier if it ceases to be registered for GST; and

(v)  the recipient indemnifies the supplier for any liability for GST and penalty that may arise from an understatement of the GST payable on any of the specified supplies received on a tax invoice the recipient issues; or

·  an agreement with the supplier embedded in an RCTI it issues that contains the following statement:

The recipient and the supplier declare that this agreement applies to supplies to which this tax invoice relates. The recipient can issue tax invoices in respect of these supplies. The supplier will not issue tax invoices in respect of these supplies.

The supplier acknowledges that it is registered for GST and that it will notify the recipient if it ceases to be registered. The recipient acknowledges that it is registered for GST and that it will notify the supplier if it ceases to be registered for GST.

The recipient indemnifies the supplier for any liability for GST and penalty that may arise from an understatement of the GST payable on any of the specified supplies received on a tax invoice the recipient issues. Acceptance of this RCTI constitutes acceptance of the terms of this written agreement.

Both parties to this supply agree that they are parties to an RCTI agreement. The supplier agrees to notify the recipient if the supplier does not wish to accept the proposed agreement within 21 days of receiving this document

(g)  the recipient must not issue a document that would otherwise be a recipient created tax invoice, on or after the date when the recipient or the supplier has failed to comply with any of the requirements of this determination.

(h)  if the recipient has a current GST turnover of less than $1,000,000, it must notify the Commissioner in writing of the recipient's intention to use recipient created tax invoices. This notification must be made before 14 days have elapsed after the first occasion that a recipient created tax invoice is issued by that recipient.

Clause 6 of the Determination defines the terms 'scrap metal' and 'scrap metal dealer' and states:

6. The following expressions are defined for the purposes of this determination:

o scrap metal means old metal that can be reworked. This includes ferrous and non ferrous metals.

o scrap metal dealer means an entity that principally supplies scrap metal.

Conclusion

If your suppliers are registered for GST, we consider that your suppliers make taxable supplies of scrap metal to you. You satisfy the definition of a scrap metal dealer. Provided you enter into an RCTI agreement with each of your scrap metal supplier and satisfy the requirements of Clause 5 of the Determination, the Commissioner will exercise his discretion to allow you to issue RCTIs for the acquisition of scrap metal from your suppliers.

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