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Ruling

Subject: GST and recipient created tax invoices

Question:

Will the Commissioner exercise his discretion pursuant to subsection 29-70(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to allow you to issue recipient created tax invoices (RCTIs)?

Answer:

The Commissioner will not exercise his discretion pursuant to subsection 29-70(3) of the GST Act to allow you to issue RCTIs.

Relevant facts

You contract with Service Providers to provide specified services in your geographic region.

Your GST turnover is expected to be less than $20M. You are registered for GST. You are not a member of a GST group. You are not a government related entity.

The majority of Service Providers are registered for GST. Hence, you are the recipient of the taxable supply of services.

You are in control of when the services are performed, what records are required to be provided and what rate is paid for the services. The value of the services provided is determined at the start of the service agreement period. The basis of calculation is either a fixed fee for a task or an hourly rate where the Service Provider is available on a time basis. The Service Providers are required to complete statistical information about the services. However, no timesheet is completed as they work to a calendar of service days in accordance with your agreement.

You provided a copy of a service agreement (the Agreement), between you and a Service Provider, which contains the following information:

· The Agreement has been negotiated to enable the provision of specific services.

· The Agreement lists the service detail and specifies, amongst other things, the location where the services are to be provided, the frequency of the service, the number of hours of service per day and the total hours of service in the contract period.

· The Agreement states that Service Provider will provide data records for the end of each calendar month.

· The Agreement states that the Service Provider will send tax invoices to you following the end of each calendar month charging for the services performed in respect of that month.

· The Agreement lists the remuneration payable to the Service Provider for each hour of service provided or report writing. The Service Provider is also paid a travelling allowance which is calculated at a specified fixed rate per hour of travel time and a fixed rate per kilometre of travel. The Agreement also lists the maximum return travel time, the maximum travel distance and the maximum number of trips for a Service Provider during the contract period.

Your present system is that the Service Provider provides their services and sends you an invoice. At this time they also supply the statistical information you require. Your payment terms are a certain number of days on receipt of tax invoice and statistical information.

Many of the Service Providers are slow to invoice for their services, which impacts on your cash flow and creditor management. This then impacts on your ability to identify the extent of unspent funds at any point in time.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 paragraph 29-70(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 subsection 29-70(2)

A New Tax System (Goods and Services Tax) Act 1999 subsection 29-70(3)

Reasons for decision

Under paragraph 29-70(1)(a) of the GST Act, a tax invoice must be issued for a taxable supply by the supplier unless it is an RCTI (in which case it must be issued by the recipient).

Subsection 29-70(3) of the GST Act defines an RCTI as 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 outlines the circumstances in which a recipient can issue an RCTI. The three broad classes of tax invoices that may be issued by a recipient of a taxable supply are:

· tax invoices for taxable supplies of agricultural products made to registered recipients

· tax invoices for taxable supplies made to registered government related entities, and

· tax invoices for taxable supplies made to registered recipients that have a turnover of at least $20 million annually; or are members of a group of companies, partnerships or trusts, or a joint venture operator, in which one or more other members of that group or participants in that joint venture have such a turnover.

Based on the information provided, you do not fall within any of these three classes outlined in GSTR 2000/10.

The Commissioner has also made a number of legislative determinations under subsection 29-70(3) of the GST Act for certain classes of tax invoices that may be issued by a recipient of a taxable supply.

In your case, we have considered whether your circumstances fit into any of these legislative determinations. Of relevance is A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (no.22) 2000 (RCTI 2000/22).

RCTI 2000/22 provides that where the supplier makes a taxable supply of labour services, the recipient of that supply may issue a tax invoice for the supply where the recipient:

· establishes the value of those services after the supply is made using a calculation process and

· satisfies the requirements set out in Clause 5 of RCTI 2000/22.

· 'Calculation process' is defined in Clause 6 of RCTI 2000/22 to mean:

· base data x appropriate rate.

where:

'Base data' is the information provided by the supplier that evidences the quantity of the supply, and includes but is not limited to:

· completion of time sheets

· listing of consultations conducted

· completion of job dockets

· listing of sales achieved

· booking obtained, or

· providing the goods to the recipient where the labour services involve the collection or delivery of goods.

'Appropriate rate' means the rate as determined by the recipient (whether or not in consultation with the supplier) that takes into account information not readily available to the supplier when the supply is made. This includes but is not limited to:

· sales rebates

· third party rebates

· volume discounts

· confidential; contractual information, or

· where the labour services involve the delivery of goods, quantity or quality checks of those goods.

There are limitations placed on who can issue RCTI's and the circumstances in which they can be issued. In RCTI 2000/22 the limitation is that the recipient must set the value of the supply after it is made and that value is set by way of a calculation process that the recipient undertakes.

In this case, the Service Provider is aware beforehand of the rate that is used to determine the value of the supply made. This is a fixed fee as set out in the Agreement. The information regarding the quantity of the supply and the rate for the supply is available to both you and the Service Provider when the supply is made. Hence, you are not the only entity that can determine the value of the services provided by the Service Provider.

As you do not establish the value of the supply after the supply is made using a calculation process that takes into account information not readily available to the Service Provider, you do not satisfy the requirements of RCTI 2000/22.

Further, you do not meet the requirements of any other legislative determination that the Commissioner has made under section 29-70(3) of the GST Act. Therefore, you are not able to issue RCTIs to the Service Providers.

Where an entity's particular circumstances do not fall properly under any of the issued legislative determinations, the entity's industry association may apply to the Commissioner to issue a new legislative determination.

The procedures for making these requests are explained in paragraphs 53 and 54 of GSTR 2000/10 which state:

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.

54. Your request for a determination should be made in writing or electronically and include the following information and documents:

· name of the industry association or registered recipient;

· type of industry in which the recipient operates;

· details of the supply and related transaction(s), including a description of the thing(s) supplied and current invoicing and payment practices;

· a statement acknowledging that the recipient(s) will enter into written agreements with suppliers in accordance with paragraph 13, requirement (e); and

· an explanation as to why the determination is requested.

Paragraph 53 of GSTR 2000/10 makes mention of industry associations making requests. This reflects the concept of there being an identified need in a particular industry group for a legislative determination. Although the paragraph was added to in the Addendum of 27 September 2000 to include the sentence 'Other registered recipients may also make requests', legislative determinations will only be made for broad classes rather than particular entities.

As you are not an industry association, the Commissioner will not make a legislative determination specifically for you.

You should note that under subsection 29-70(2) of the GST Act, the supplier of a taxable supply must within 28 days after the recipient of the supply requests it, give to the recipient a tax invoice for the supply.

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