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Edited version of your written advice

Authorisation Number: 1051320139623

Date of advice: 21 December 2017

Ruling

Subject: GST and non-resident voucher provider, sell through arrangements.

Question 1

1. Is ABC Pty Limited liable for GST on the supply of gift-cards sold by non-resident entities under a sell through arrangement?

Answer

1. No, ABC Pty Ltd is not liable to account for GST on the supply of gift-cards which satisfy section 100-5 of the A New Tax System (Goods and Services) Act 1999 (GST Act) (Division 100 gift-cards) sold by non-resident Card Partner under a sell through arrangement. ABC Pty Ltd is also not liable to account for GST on the supply of gift-cards which do not satisfy section 100-5 of the GST Act (non-Division 100 gift-cards) sold by non-resident entities under a sell through arrangement.

ABC Pty Ltd is not an electronic distribution platform (EDP) under section 84-70 of the GST Act to the extent that it only builds or maintains the infrastructure behind a service that makes supplies available to end users. Further, ABC Pty Ltd is not an EDP to the extent that it sells gift-cards that are:

Question 2

2. Is the non-resident entities or the retailer liable for GST on the sale of non-Division 100 gift-cards to Australian consumers under a sell through arrangement, including the situation where the gift-cards are ordered online but physically delivered?

General Advice

2a. Yes. The non-resident entities would be liable for GST on the sale of non-Division 100 gift-cards to Australian consumers under a sell through arrangement which entitles the holder to an experience. This would include the situation where the gift-cards are ordered online but physically delivered.

2b. Yes. The non-resident entities would be liable for GST on the sale of non-Division 100 gift-cards to Australian consumers under a sell through arrangement which entitles the holder to a digital subscription. This would include the situation where the gift-cards are ordered online but physically delivered. However, if a gift card for a digital subscription is provided digitally via an retailer that would be an EDP, then the retailer would be liable for the GST.

2c. No. Neither the non-resident entities nor the retailer are liable for GST on the sale of non-Division 100 gift-cards to Australian consumers under a sell through arrangement where the card is a stored value card. This would include the situation where the gift-cards are ordered online but physically delivered. Note: the non-resident entities will be liable for GST when the card is used if that use is a supply that meets the requirements of a taxable supply under section 9-5 of the GST Act.

2d. Yes. The non-resident entities would be liable for GST on the sale of non-Division 100 gift-cards to Australian consumers under a sell through arrangement which entitles the holder to a discount. A discount card is not a Division 100 voucher; so the sale will be a taxable supply if the requirements of section 9-5 are met.

Relevant facts and circumstances

ABC Pty Ltd is an Australian subsidiary of a US based company listed on the NASDAQ.

ABC Pty Ltd is registered for Australian GST.

ABC Pty Ltd provides many services to its customers, including retail distribution, IT support services, card activation and transaction processing services.

There are three primary constituents of ABC Pty Ltd’s operations: customers who purchase the products and services offered, providers who offer branded gift cards and other prepaid products that are redeemable for goods and services and organisations that sell those products to the retail market.

Notably, ABC Pty Ltd provides card activation services in respect of the gift cards. Only valid, authentic gift cards that have been purchased through retailers and subsequently ‘activated’ by ABC Pty Ltd can successfully be used to purchase goods or services at retail outlets and internet stores. ABC Pty Ltd’s IT and activation systems interface with the retailer’s point of sale (POS) systems to facilitate activation of cards at the point of sale.

As part of its business model, ABC Pty Ltd engages with both residents and non-residents in relation to the services described above. The non-resident entities are not making supplies through an enterprise in Australia and the thing is not being done in Australia (section 9-25 of the GST Act).

The gift cards can be sold by means of two different selling models, namely, a sell-through arrangement or a buy-sell arrangement. For the purposes of this Private Ruling Request, only the sell-through arrangement will be examined.

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, Subsection 9-17(1)

A New Tax System (Goods and Services Tax) Act 1999, Section 84-55

A New Tax System (Goods and Services Tax) Act 1999, Section 84-70

A New Tax System (Goods and Services Tax) Act 1999, Section 100-5

A New Tax System (Goods and Services Tax) Act 1999, Section 100-25

Reasons for decision

Question 1

Summary

ABC Pty Ltd is not liable to account for GST on the sale of non-Division 100 gift-vouchers to Australian consumers through retail stores or on-line. ABC Pty Ltd is not the entity making the supply, rather ABC Pty Ltd provide services to non-resident entities and retailers which facilitate the supply.

Although, if ABC Pty Ltd was considered to be an EDP, section 84-55 of the GST Act would shift the GST liability from the non-resident entities, if they were supplying an inbound intangible consumer supply (IICS), to the operator of an EDP through which that supply is made.

However, ABC Pty Ltd is not an EDP to the extent that it only builds or maintains the infrastructure behind a service that makes supplies available to end users. In the current case, the service provided by ABC Pty Ltd is limited to the processing and activation of physical and digital gift-cards following approval by the non-resident entities, which enables the service to be made available to the end-users. We therefore consider that the services provided by ABC Pty Ltd on the sale of non-Division 100 gift-vouchers to Australian consumers are not subject to the EDP rules as stated at paragraph 25 of LCG 2017/D4:

Note also that in respect of Division 100 cards the draft LCG 2017/D4 further clarifies that an entity that sells these cards are not treated as an EDP in relation to those sales:

Question 2

General advice

2a Advice in regard to a gift card where the card entitles the holder to an experience.

The draft LCG 2017/D4 advises that sales of experience vouchers are not caught be the EDPs rules:

General advice

2b Advice in regard to a gift card for a digital subscription provided digitally via a retailer that would be an EDP, the retailer would be liable for the GST.

LCG 2017/D4 GST on supplies made through electronic distribution platforms confirms our view of the law relating to supplies made through electronic distribution platforms (EDP’s).

A retailer could be subject to the EDP rules even if the service provider (ABC Pty Ltd) is not considered an EDP. LCG 2017/D4 provides guidance which suggests that retailers could be liable to account for GST on the sale of non-Division 100 gift-vouchers to Australian consumers through on-line stores if they satisfy the requirements and do not satisfy the exclusions outlined in the LCG for example:

Retail Store

A ‘bricks and mortar’ retail store cannot be an EDP because, as stated in the LCG:

Online Store

However, if the retail store makes supplies through an online presence it would satisfy this requirement, for example:

If the retailers’ online store does not satisfy all of the criteria listed in paragraph 66 of LCG 2017/D4, the exclusion will not apply. As explained in the LCG:

Step four only applies if there are multiple EDP’s involved in the supply (see paragraphs 100 to 114 of the LCG).

According to the facts you have presented in your submission, it appears unlikely (for example) that an online retailer could not authorise the charge to the recipient. Therefore generally they would be liable to account for GST on the sale of non-Division 100 gift-vouchers to Australian consumers in the scenario where the other steps outlined in the LCG are satisfied.

However, in the situation where non-Division 100 gift-vouchers for digital subscriptions are sold to Australian consumers and are ordered online but physically delivered, it is the non-resident entity who would be liable to account for GST. This is because the physical delivery of the gift-cards by the retailer means that the EDP requirement that supplies are to be delivered by electronic communication is not met.

General Advice

2c Advice in regard to a gift card that is a stored value card.

GSTR 2003/5 Goods and Services Tax: Vouchers states the following regarding stored value cards:

GSTR 2003/12 Goods and services tax: when consideration is provided and received for various payment instruments and other methods of payment also discusses stored value cards in the following paragraphs:

General Advice

2d Advice in regard to a discount card.

GSTR 2003/5 Goods and Services Tax: Vouchers provide guidance regarding discount cards at paragraph 182 to 190 which includes the following statements:


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