Edited version of private advice

Authorisation Number: 1051869052692

Date of advice: 24 December 2021

Ruling

Subject: GST and supplies made through an EDP

Question 1

Is the Entity's subscription aggregation platform service an electronic distribution platform ("EDP") within the meaning of section 84-70 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. The Entity is an EDP only in relation to supplies of inbound intangible consumer supplies made through its subscription aggregation platform known as XYZ.

Question 2

Is the Entity, the operator of the EDP when inbound intangible consumer supplies (as defined in section 84-65 of the GST Act) are made through its subscription aggregation platform service?

Answer

Yes. The Entity is the operator of the EDP when inbound intangible consumer supplies are made through its XYZ.

Question 3

Is the Entity treated as the supplier when inbound intangible consumer supplies are made through its subscription aggregation platform service under section 84-55 of the GST Act?

Answer

Yes. The Entity is treated as the supplier of inbound intangible consumer supplies made through its XYZ.

Question 4

Can the Entity and content suppliers who make supplies by means of electronic communication (as defined in s5 of the Electronic Transactions Act 1999 (Cth)) agree that the Entity will be treated as the supplier when supplies by means of electronic communication are made through its subscription aggregation platform service, as per section 84-60 of the GST Act?

Answer

Yes. The Entity and content suppliers who make their supplies by means of electronic communication through the XYZ may enter into agreements in writing as per section 84-60 of the GST Act to treat the supplies as inbound intangible consumer supplies.

Agreements under section 84-60 of the GST Act are only available for supplies that are not inbound intangible consumer supplies.

Question 5

If the Entity and content suppliers that are registered for GST enter into an agreement in (4) above, is GST applicable for supplies between the Entity and content suppliers because the supplies made by means of electronic communications are treated as inbound intangible consumer supplies?

Answer

The supply of services provided by the Entity to content suppliers from Australia will be subject to GST as this supply of services will satisfy section 9-5 of the GST Act. When this supply of services is provided to non-resident content suppliers it will be GST-free provided the supply satisfies table item 2 of subsection 38-190(1) of the GST Act.

Supplies made by non-resident content suppliers to the Entity will not be connected with Australia under table item 1 of subsection 9-26(1) of the GST Act and will not be subject to GST.

Supplies made by content suppliers from Australia to the Entity will be subject GST.

An agreement made between content suppliers from Australia and the Entity under section 84-60 of the GST Act relates only to the supply made through an EDP, as stated in paragraph 84-60(1)(a) of the GST Act. Therefore, only those supplies made to the 'end consumers' can be treated as inbound intangible consumer supplies under an agreement made under section 84-60 of the GST Act.

Please refer to the reasons for decision for details.

Question 6

If the Entity and content suppliers that are registered for GST do not enter into section 84-60 of the GST Act agreements, does subsection 153-55(4A) of the GST Act preclude the Entity and content suppliers from entering into subdivision 153B of the GST Act agreements (as allowed by subsection 153-50(1) of the GST Act) where the Entity bills their supplies on its EDP?

Answer

Subdivision 153B of the GST Act allows a principal and an intermediary to enter into an agreement where the intermediary will be treated as the supplier.

An arrangement is also available for an EDP to be treated as the supplier when they enter into an agreement under 84-60 of the GST Act.

Were both agreements allowed it may create a conflict in relation to which agreement or arrangement would take priority.

Subsection 153-55(4A) of the GST Act gives priority to agreements under section 84-60 of the GST Act, if section 84-55 of the GST Act applies.

If the Entity and content suppliers that are registered for GST do not enter into agreements under section 84-60 of the GST Act, they may enter into agreements under subdivision 153B of the GST Act where the Entity may bill their supplies on its EDP. However, they are not allowed to enter into both agreements for the same supply.

Please refer to the reasons for decision for details.

This ruling applies for the following period:

Not applicable

The scheme commences on:

Not applicable

Relevant facts and circumstances

The Entity has developed and intends to market a subscription aggregation platform service that will allow its customers in the relevant market by offering entertainment subscription services in one marketplace.

The Entity's subscription aggregation platform is known as XYZ.

The relevant market involves third-party suppliers by passing telecommunications operators and delivering audio, video and other media services directly to customers' devices using telecommunications carriers' infrastructure, e.g. streaming television over internet to smart phones and home devices.

The subscription aggregation platform service will allow the Entity to maintain the customer relationship, including marketing and billing.

As the marketplace platform operator, the Entity will allow other entities to market or make their supplies available to Australian consumers through its store.

The services provided by suppliers of entertainment subscription by means of electronic communications (content suppliers) is known as "Subscription".

The content suppliers make their supplies through electronic communication as defined in section 5 of the Electronic Transactions Act 1999

The Entity and the content suppliers of entertainment subscription services made to Australian consumers, other than inbound intangible supplies, intend to enter into agreements so that these supplies made through the Entity's EDP are treated the same as inbound intangible consumer supplies.

The Entity confirms the supplies intended to be covered by the agreements between the Entity and the content suppliers will be:

•         made through its EDP; and

•         covered by a written agreement entered into with the suppliers of the electronic communications; and

•         treated as if they were inbound intangible consumer supplies made through its EDP; and

•         both the supplier and the Entity will be registered.

The agreement will not apply to GST-free or input taxed supplies and will exclude supplies which would not otherwise be covered under s84-55, if they were an inbound intangible consumer supply.

The Entity and content suppliers are not seeking an agreement to cover subsection of 84-55(4) of the GST Act.

The XYZ is the only EDP engaged in providing the subscription aggregation platform services.

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 84-55.84-60,84-65 and 84-70

A New Tax System (Goods and Services Tax) Act 1999 - Subdivision 153B

A New Tax System (Goods and Services Tax) Act 1999 - subsection 153-55(4A)

Electronic Transactions Act 1999- section 5

Reasons for decision

Summary to Question 1.

The Entity is an EDP only in relation to supplies of inbound intangible consumer supplies made through its subscription aggregation platform known as XYZ.

Detailed reasoning

Based on the terms under which the Entity provide the content suppliers services to their customer via XYZ the Entity's role is that of an agent, and not a seller/reseller in their own right.

Law Companion Ruling LCR 2018/2: GST on supplies made through electronic distribution platforms (LCR 2018/2) explains the EDP rules. Paragraphs 19 to 22 of LCR 2018/2 consider the EDP definition under section 84-70 of the GST Act.

A service that can be an EDP includes (but is not limited to) a website, internet portal, gateway, store or marketplace.

A service will be an EDP where it satisfies all the following:

a) the service allows entities to make supplies available to end-users, and

b) the service is delivered by means of electronic communication, and

c) if the relevant supplies are inbound intangible consumer supplies (that is, not offshore supplies of low value goods), the supplies are made by means of electronic communication.

However, a service is not an EDP if it only provides one or more of the following in relation to a supply:

a) a carriage service or

b) a service of providing access to a payment system or processing payments, or

c) a service of providing 'face value vouchers', the supply of which is not a taxable supply.

Service allows entities to make supplies available to end-users (84-70(1)(a))

Paragraph 24 of LCR 2018/2 refers to an EDP as a service which allows entities to make supplies available to end-users and which allows buyers to make an offer for an item, and/or which allows merchants to accept orders by buyers.

The Entity will allow the content suppliers to market or make their supplies available to Australian consumers through its store. (XYZ) i.e. The Entity either supplies entertainment subscription services, e.g. XYZ Sport or provides marketplace distribution services to other suppliers, e.g. inbound streaming suppliers.

It is our view that the Australian consumers as end users and the content suppliers will make offers and accept orders by using the XYZ and the service will satisfy the first requirement.

Service delivered by electronic communication (84-70(1)(b)

The second requirement is that the service of allowing entities to make supplies available to end-users must be delivered by electronic communication.

Paragraph 33 of LCR 2018/2 states the following:

33. Electronic communication is defined to mean:

(a) a communication of information in the form of data, text, or images by means of global and/or unguided electromagnetic energy; or

(b) a communication of information in the form of speech by means of guided and/or unguided electromagnetic energy, where the speech is processed at its destination by an automated voice recognition system.

Section 195-1 of the GST Act states that 'electronic communication' has the same meaning as in section 5 of the Electronic Transactions Act 1999.

The content suppliers would be making their supplies by means of electronic communication as defined section 5 of the Electronic Transactions Act 1999.

The content suppliers will be delivering audio, video and other media services directly to customers' devices using telecommunications carriers' infrastructure, e.g. streaming television over internet to smart phones and home devices.

Therefore, we consider that the services provided by the content suppliers to the Australian consumers would be delivered by electronic communication.

Inbound intangible consumer supplies must be made by electronic communication (84-70(1)(c)

Paragraph 40 of LCR 2018/2 states the following:

Inbound intangible consumer supplies must be made by electronic communication>

40. The last requirement is that, if the supply is an inbound intangible consumer supply, the supply must be made (that is, delivered) by electronic communication. This means the EDP rules for inbound intangible consumer supplies only apply to digital products or digital services. This requirement does not apply to offshore supplies of low value goods.

An inbound intangible consumer supply is defined in subsection 84-65(1) of the GST Act as a supply of anything other than goods or real property and the recipient is an Australian consumer, unless:

•         the thing supplied is wholly done in Australia, or

•         the supply is made wholly through an enterprise the merchant carries on in Australia.

The supplies of entertainment services will be made by the content suppliers in the form of digital products or digital services such as audio, video and other media services as explained above. These services are delivered by means of electronic communication.

We consider that the Entity will only be considered as an EDP for supplies of inbound intangible consumer supplies delivered through XYZ by mean of electronic communication.

Summery to Question 2

The Entity is the operator of the EDP when inbound intangible consumer supplies are made through its XYZ

Detailed reasoning

The EDP rules require that supplies made by an entity meet the following four steps to be considered as an EDP operator:

Step 1 Is the supply made through an EDP?

Step 2 Is the supply subject to the EDP rules?

Step 3 Is the supply excluded from the EDP rules?

Step 4 If multiple EDPs are involved, is the EDP operator responsible for GST?

If each of the EDP rules is satisfied, the entity instead of the merchant is treated for GST purposes as:

•         having made the supply

•         having done so for the consideration for which it was made, and

•         having done so in the course or furtherance of an enterprise that it carries on.

Step 1 - Is the supply made through an EDP?

As discussed in Question 1, the supply of subscription aggregation platform service by the Entity will be an EDP and the content suppliers will make their supplies of entertainment services through XYZ.

Step 2 - Is the supply subject to the EDP rules?

An operator of an EDP will be responsible for GST (provided there are no exclusions in Steps 3 and 4) and the supply is made through an EDP and the supply is:

•         a supply of a digital service or digital product (inbound intangible consumer supply) -subsection 84-55(1).

•         a digital supply that is not an inbound intangible consumer supply but there is an agreement in relation to these supplies pursuant to section 84-60.

•         an offshore supply of low value goods - subsection 84-81(3).

The supplies of entertainment services available on the XYZ will be made in the form of digital services or digital products by the content suppliers as explained above.

Inbound intangible consumer supplies and exclusions

The meaning of inbound intangible consumer supplies has exclusions where:

•         the thing is done wholly in Australia, or

•         the supply is made wholly through an enterprise the merchant carries on in Australia.

Paragraph 58 of LCR 2018/2 provides by way of practical guidance, unless the EDP operator has information to the contrary at the time of the transaction, if their agreement with the merchant supplying digital services or digital products specifies a business address for the merchant:

•         in Australia - it is reasonable to assume that the supply is not an inbound intangible consumer supply (and that therefore the merchant, and not the EDP operator, will be responsible for GST).

•         outside Australia - it is reasonable to assume that the supply is an inbound intangible consumer supply (and that therefore the EDP operator will be responsible for GST).

Agreement to treat the supply of a digital service as an inbound intangible consumer supply when otherwise excluded (section 84-60)

An inbound intangible consumer supply is defined in section 84-65 of the GST Act. A digital supply will not meet the definition when the thing being supplied is either done wholly in the indirect tax zone or the supplier makes the supply wholly through an enterprise that the supplier carries on in the indirect tax zone.

An EDP operator can treat these supplies as an inbound intangible consumer supply under section 84-60 of the GST Act only if the agreement with the merchant about these supplies satisfies each requirement in subsection 84-60(1) of the GST Act listed below:

•         the supply is made by means of electronic communication (it is a digital supply)

•         the supply is made through the EDP

•         the supply is covered by a written agreement entered into between the merchant and the EDP operator before the supply is made for the supply to be treated as if it were an inbound intangible supply made through the platform, and

•         the EDP operator is registered for GST in Australia.

The agreement cannot, however, under subsection 84-60(2) of the GST Act extend the EDP operator's role if:

•         the supply is GST-free or input taxed or

•         the operator will not be treated as being the supplier and making the supply as if it were an inbound intangible consumer supply.

The Entity and the content suppliers of entertainment made by electronic communications to Australian consumers intend to enter into an agreement for supplies, other than inbound intangible consumer supplies, so that these supplies made through the XYZ are treated as inbound intangible consumer supplies. The Entity is registered for GST. The Entity will not enter into an agreement for supplies that are GST-free or input taxed.

We consider that the supply of subscription aggregation platform service provided by the Entity will be subject to EDP rules as the supply will satisfy all the requirements under subsection 84-60(1) of the GST Act.

Step 3 - Is the supply excluded from the EDP rules?

For the exclusion to apply, all the following criteria must be met in relation to a supply made through the platform:

•         the EDP operator does not authorise:

-       the charge to the recipient of the supply

-       delivery of the supply

•         the EDP operator does not set (whether directly or indirectly) any of the terms and conditions under which the supply is made

•         a document relating to the supply issued to the recipient identifies the supply and the merchant as the supplier of that supply, and

•         the merchant and the EDP operator have agreed in writing that the merchant is the entity liable for paying the GST for the supply. Alternatively, the merchant and the EDP operator have agreed in writing that the merchant is the entity liable for paying GST for a class of supplies that includes the supply concerned.

The Entity has confirmed that they are not seeking to enter into an agreement with the content suppliers that will cover the exclusion under subsection 84-55(4) of the GST Act. Therefore, these exclusions will not apply to the supplies made through XYZ.

Step 4: Multiple EDPs are not involved in relation to the supply of subscription aggregation platform service by the Entity.

Since the supply of subscription aggregation platform service satisfy all the EDP rules as explained above, the Entity will be considered as an EDP operator and the supplier of inbound intangible consumer supplies made through the XYZ.

Therefore, the Entity will be liable for GST in relation to these inbound intangible consumer supplies.

Summary to Question 3

The Entity is treated as the supplier of inbound intangible consumer supplies made through its XYZ.

Detailed reasoning

Subsection 84-55(1) of the GST Act states:

1. If an inbound intangible consumer supply is made through an electronic distribution platform, the operator of the platform, instead of the supplier, is treated, for the purposes of the GST law:

(a) as being the supplier of, and as making the supply; and'

(b) as having made the supply for the consideration for which it was made; and

(c) as having made the supply in the course or furtherance of an enterprise that the operator carries on.

Note: As a consequence, GST on the supply is payable by the operator of the electronic distribution platform.

The supplies of entertainment subscription services are provided by the content suppliers through the Entity's EDP service XYZ. As explained in question 2, it is considered that the Entity is the operator of the EDP known as XYZ. Therefore, the Entity is treated as the supplier of entertainment subscription services and not the content suppliers who make the supply through XYZ.

Subsection 84-55(2) of the GST Act explains who will be treated as supplier if the inbound intangible consumer supply is made through more than one EDP operator. However, the Entity has confirmed that only XYZ is engaged in making the supply of entertainment subscription services and that the content suppliers would not be considered to be an EDP in their own right.

Summary to Question 4

The Entity and content suppliers who make their supplies by means of electronic communication through the XYZ may enter into agreements in writing as per section 84-60 of the GST Act to treat the supplies as inbound intangible consumer supplies.

Agreements under section 84-60 of the GST Act are only available for supplies that are not inbound intangible consumer supplies.

Detained reasoning

An EDP operator can treat certain supplies as an inbound intangible consumer supply under section 84-60 of the GST Act only if the agreement with the supplier about these supplies satisfies each requirement in subsection 84-60(1) of the GST Act.

Supplies made by Australian merchants through an EDP will rarely be inbound intangible consumer supplies as they are generally either done in Australia or made through an enterprise carried on in Australia. For these supplies, the Australian merchants (content suppliers) are liable for GST under the existing GST rules, however subject to section 84-60 of the GST Act these supplies can be covered by an agreement between the merchant and the operator of the EDP and thus be treated as inbound intangible consumer supplies. (Refer to paragraph 1.117 of explanatory memorandum to Tax and Superannuation Laws Amendment (2016 Measures No.1) Act 2016)

The special rules in section 84-60 of the GST Act allow merchants and operators to jointly agree for the inbound consumer supply rules to apply more widely where this is more convenient or commercially desirable for the parties. In some cases, this agreement may occur through, for example, the standard terms and conditions that the operator of an EDP requires merchants to accept before making use of the platform. (Refer to paragraph 1.121 of explanatory memorandum to Tax and Superannuation Laws Amendment (2016 Measures No.1) Act 2016)

The Entity and the content suppliers may enter into agreements under section 84-60 of the GST Act where the supplies of entertainment subscription services do not meet the requirements of inbound intangible consumer supplies as per section 84-65 of the GST Act.

Summary to Question 5

The supply of services provided by the Entity to content suppliers from Australia will be subject to GST as the supply of this service will satisfy section 9-5 of the GST Act. The supply of this service when provided to non-resident content suppliers will be GST-free provided the supply satisfies table item 2 of subsection 38-190(1) of the GST Act.

When the Entity makes the payment of revenue collected by them to the content suppliers, GST will not be included in the payments to content suppliers.

Supplies made by non-resident content suppliers to the Entity will not be connected with Australia under table item 1 of subsection 9-26(1) of the GST Act and will not be subject to GST. Supplies made by content suppliers from Australia to the Entity will be subject GST.

Detailed reasoning

You are liable to pay GST on taxable supplies.

Section 9-5 of the GST Act provides 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.

Under the terms and conditions of the contract between the Entity and content suppliers, the Entity will be making the supply of services by referring customers to content suppliers. They are also providing the service of processing payments received from the customers. The content suppliers are required to pay a fee to the Entity, known as partner fees, for the services provided by the Entity.

Supplies made by the Entity to content suppliers from Australia

The supply of services provided by the Entity to the content suppliers from Australia will satisfy the requirements of a taxable supply. The supply will be made for consideration (partner fees); it will be made in the course or furtherance of their enterprise of providing subscription aggregation platform services; the supply will be connected with Australia and the Entity is registered for GST.

Therefore, the supply of services provided by the Entity to the content suppliers from Australia will satisfy the requirements of section 9-5 of the GST Act and the supply will be subject to GST.

Furthermore, the supply of services by the Entity to content suppliers from Australia are not considered as cross border transactions and therefore, the cross-border rules will not apply to this supply of services.

Supplies made by the Entity to non-resident content suppliers

Subsection 38-190(1) of the GST Act provides that the supplies of things other than goods or real property for consumption outside of Australia will be GST-free.

Table item 2 of subsection 38-190(1) of the GST Act provides that a supply that is made to a non-resident who is not in Australia when the thing supplied is done is GST- free where:

a)    the supply is neither a supply of work physically performed on goods situated in Australia when the work is done, nor a supply directly connected with real property situated in Australia; or

b)    the non-resident acquires the thing in carrying on the non-resident's enterprise but is not registered or required to be registered.

The supply of services provided by the Entity to the non-resident content suppliers is not work physically performed on goods situated in Australia nor directly related to real property in Australia. Therefore, the supply satisfies the requirements of table item 2(a) of subsection 38-190(1) of the GST Act.

The content suppliers being non-resident recipients will acquire the services in carrying on their enterprise overseas and if they are neither registered nor required to be registered for GST, the supply will satisfy the requirements of table item 2(b) of subsection 38-190(1) of the GST Act.

Therefore, the supply of services provided by the Entity under the contract to non-resident content suppliers will be GST-free provided the supply satisfies table item 2(a) or (b) of subsection 38-190(1) of the GST Act, as explained.

Supplies made by content suppliers from Australia to the Entity

The supplies made by content suppliers from Australia who are registered for GST to the Entity will be taxable as the supply will satisfy the requirements of section 9-5 of the GST Act.

An agreement made between content suppliers from Australia and the Entity under section 84-60 of the GST Act relates only to the supply made through an EDP, as stated in paragraph 84-60(1)(a) of the GST Act. Therefore, only those supplies made to the 'end consumers' can be treated as inbound intangible consumer supplies under an agreement made under section 84-60 of the GST Act.

Supplies made by non-resident content suppliers to the Entity

Section 9-26 of the GST Act explains when a supply made by a non-resident supplier to a GST registered acquirer is are not connected with Australia.

Table item 1 of subsection 9-26(1) of the GST Act provides that a supply of anything other than goods or real property is not connected with Australia if:

a) the thing supplied is done in Australia; and

b) the recipient of the supply is an Australian-based business.

Subsection 9-26(2) of the GST Act provides that an entity is an Australian-based business recipient if:

a) the entity is registered; and

b) an enterprise of the entity is carried in Australia; and

c) the entity's acquisition of the thing supplied is not solely of a private or domestic nature.

Summary to Question 6

Subdivision 153B of the GST Act allows a principal and an intermediary to enter into an agreement where the intermediary will be treated as the supplier.

An arrangement is also available for an EDP to be treated as the supplier when they enter into an agreement under 84-60 of the GST Act.

Were both agreements allowed it may create a conflict in relation to which agreement or arrangement would take priority.

Subsection 153-55(4A) of the GST Act gives priority to agreements under section 84-60 of the GST Act, if section 84-55 of the GST Act applies.

If the Entity and the content suppliers that are registered for GST do not enter into agreements under section 84-60 of the GST Act, they may enter into agreements under subdivision 153B of the GST Act where the Entity may bill their supplies on its EDP. However, they are not allowed to enter into both agreements for the same supply.

Detailed reasoning

The extension of the EDP rules under section 84-60 of the GST Act means that the rules can potentially apply to supplies between principals and intermediaries to which Subdivision 153-B of the GST Act could also apply. As both Subdivision 153-B of the GST Act and the extension of the EDP rules change or extend the entity that is liable for GST on a supply, there would be a conflict if both were to apply to the same supply.

To prevent this issue from arising, subsection 153-55(4A) of the GST Act provides that the agreement between principals and intermediaries under Subdivision 153 B of the GST Act cannot apply to the supply where the EDP rules apply to the same supply.

In this case, the Entity has been considered as an EDP and the EDP rules will apply to the supplies made by the content suppliers through the Entity's EDP, XYZ. Under the agreement between the Entity and the content suppliers, the Entity will be issuing invoices (as per the customers current billing agreement with the Entity) to the customers as a supplier for the supplies made through their platform.

It is our view that if the Entity and the suppliers that are registered for GST do not enter into agreements under section 84-60 of the GST Act, they may enter into agreements under subdivision 153B of the GST Act. However, both agreements are not available for the same supply.

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