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Edited version of your written advice
Authorisation Number: 1013133745099
Date of advice: 1 December 2016
Ruling
Subject: GST and supply of delivery services
Question
Were you making a taxable supply when you supplied delivery services to Entity 1 and Entity 2?
Answer
Yes.
Relevant facts
You are registered for GST.
You purchased a franchise (the franchise) from Entity 1 for a specified franchised area in Australia.
The franchise was purchased a few years ago. The franchise was terminated recently.
The franchise primarily traded goods in the form of buying and selling goods.
The franchise had three components:
Component 1
You purchased goods from Entity 1 and on-sold the goods to your clients both inside and outside your designated franchise territory.
Document A provides an example of the tax invoice issued by you to your client, entity X. In the invoice, you were referred to by your trading name. The invoice shows that GST was not included in the price of the goods sold by you to entity X.
Document B provides an example of a recipient created tax invoice (RCTI) issued by Entity 1 to you. The invoice shows that GST was not included in the price of the goods sold by Entity 1 to you.
Component 2
You made deliveries of goods on behalf of Entity 1 and Entity 2 to their own corporate clients using your own vehicle. The delivery of the goods was a free service provided by Entity 1 and Entity 2 to their client. Entity 1 and Entity 2 paid you a delivery fee that was calculated as a percentage of the sales billed to their client.
No written contract existed between Entity 1 and/or Entity 2 and you in terms of an obligation to deliver the goods.
Document C provides an example of an invoice raised by Entity 2 and issued to its corporate client, entity Y. This invoice shows that GST was not included in the price of the goods and it does not disclose any delivery fees. You are not referenced in this sale.
Document D provides an example of an RCTI issued by Entity 2 to you. The invoice shows that you received a delivery fee calculated as a fixed percentage of sales invoiced by Entity 2 to its client. The RCTI shows the GST amount as $0.00.
Component 3
You made deliveries of goods on behalf of Entity 1/Entity 2 (you are not sure which) for a contract that Entity 1/Entity 2 had with their client, entity Z, whereby you delivered goods to entity Z's client using your own vehicle. The delivery was a free service provided by Entity 1/Entity 2 to entity Z. Entity 1/Entity 2 paid you a fixed rate delivery fee of a certain percentage of their client's invoice.
No written contract existed between Entity 1 and/or Entity 2 and you in terms of your obligation to deliver goods.
Document E provides an example of an RCTI issued by Entity 2 to you which shows that you received a delivery fee equal to a certain percentage of the sales. The invoice shows the GST amount as $0.00.
Document F is an adjustment note that was issued by Entity 1 to you in relation to delivery services. The adjustment note shows the GST amount as $0.00.
You have not remitted GST on the supply of your delivery services. You will amend your returns if the supply is ruled to be a taxable supply.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
Summary
You made a supply of delivery services to Entity 1 and/or Entity 2. This supply was a taxable supply because all the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are satisfied. Hence, GST is payable on the supply of the delivery services.
Detailed reasoning
GST is payable on any taxable supply that you make.
Section 9-5 of the GST Act sets out the requirements for a supply to be taxable. It states:
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 that you *carry on; and
(c) the supply is *connected with the indirect tax zone; 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.
(* denotes a term defined in section 195-1 of the GST Act)
Indirect tax zone means Australia.
Under your arrangements with Entity 1 and Entity 2, you supplied the delivery services to Entity 1 and/or Entity 2 when you delivered goods to their clients in return for delivery fees. The supply of the delivery services by you to Entity 1 and Entity 2 was a separate supply to the supply of the goods that Entity 1 and Entity 2 made to their clients.
Your supply of the delivery services to Entity 1 and Entity 2 meets the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act, as:
● you supplied the delivery services for consideration (paragraph 9-5(a))
● the supply was made in the course or furtherance of an enterprise that you carried on (paragraph 9-5(b))
● the supply was connected with Australia (paragraph 9-5(c)), and
● you were registered for GST when these supplies were made (paragraph 9-5(d)).
There are no provisions in the GST Act under which your supply of the delivery services is
GST-free or input taxed.
Therefore, as all of the requirements of section 9-5 of the GST Act are met, your supply of the delivery services was a taxable supply. Hence, you are required to pay GST on the supply of your delivery services to Entity 1 and Entity 2.
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