Edited version of private advice

Authorisation Number: 1051752725304

Date of advice: 17 September 2020

Ruling

Subject: GST and small-scale technology certificates

Question

Are you liable for GST on the full amount (amount received from the client plus the amount received from the solar panel supplier) for your supply of installation of solar panel to your client?

Answer

Yes. You are liable for GST on the full invoice amount (the amount received from the client plus the amount received from the solar panel supplier).

This ruling applies for the following periods:

Tax periods started from 1/07/20XX to 30/06/20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Youoperates a solar panel installation business.

You are registered for GST.

In installing the solar panel for a client, the arrangement works as follows:

·         You invoice the client total GST inclusive amount for the installation.

·         The client assigns their right to create the small-scale technology certificates (STCs) in relation to the system to the solar panel supplier, in return getting an 'up-front discount' on the purchase and installation of the panel system.

·         After installing the panels and completing the job:

-        you will receive from the client the total invoiced amount minus the 'up-front discount';

-        the solar panel supplier pays you an amount equivalent to the 'up-front discount' for the installation. In doing this, the solar panel supplier issues a payment advice to you with no GST included in the amount pay to you.

You have been reporting GST on the full invoice amount inclusive of the 'up-front discount' (the STC rebate). However, you started to question whether this is correct as the payment advice provided by the solar panel supplier shows no GST in the STC rebate amount payable to you.

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 section 9-10

A New Tax System (Goods and Services Tax) Act 1999 section 9-15

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

Reasons for decision

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that 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 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.

In the current case, it is not in dispute that when installing the solar panel for your client, you are making a taxable supply as all the requirements for a taxable are met.

The issue arises as to what constitutes the consideration for the taxable supply.

Consideration' is defined in section 9-15 of the GST Act as including any payment, or any act or forbearance in connection with a supply of anything or in response to, or for the inducement of a supply of anything. Further, it does not matter whether the payment, act or forbearance was voluntary, or whether it was by the recipient of the supply.

In the current case, there are two relevant transactions.

The first one is the transaction where the client assigns their right to create the small-scale technology certificates (STCs) in relation to the solar system to the solar panel supplier, in return getting an 'up-front discount' on the purchase and installation of the panel system. The substance of this transaction is that the client is paying for the purchase and installation of the solar panel system partially with money they get by selling their right to create the STCs.

The second transaction is you supplying the service of installing the system for the client for a fee. The fee is expressed as the full invoice amount. Instead of paying you the full invoice amount, the client is paying only the discounted amount; the rest of the amount which is equivalent to the 'up -front discount', is paid by the solar panel supplier. This is done pursuant to a pre-existing arrangement between the client, the solar panel supplier and you.

Applying section 9-15 of the GST Act, the payments from both the client and the solar panel supplier are for the inducement of the supply of the installation service you made; therefore they are the consideration for your supply. The fact that the solar panel supplier is not a recipient of the supply does not change that. The solar panel supplier is paying you for the supply you made to the client based on their agreement with the client. The payment advice issued is merely a remittance advice to notify the payment made to you. That is why no GST is included in the amount.

In conclusion, you are liable for GST on the full invoice amount which is the total amount paid by the client and the solar panel supplier.

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