Edited version of private advice

Authorisation Number: 1052010156622

Date of advice: 26 July 2022

Ruling

Subject: GST and electronic distribution platforms

Question 1

Are you an electronic distribution platform (EDP) operator as defined in section 84-70 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes

Question 2

Are you liable for GST pursuant to section 9-40 of the GST Act on the sale of products sold on behalf of merchants through your web platform?

Answer

No

This ruling applies for the following period:

XX/XXX/20XX to XX/XX/20XX

The scheme commences on:

XX July 20XX

Relevant facts and circumstances

X (you) is registered for GST.

You are based in Australia only.

You operate an online marketplace (a website) (the X platform) through which you facilitate sales of merchants' 'products', which are goods, services and vouchers. You are not a reseller (you don't buy products from merchants and resell them).

At this stage all the merchants are based in Australia and all buyers of the products are based in Australia.

The buyers are generally organisations within Australia that have a certain purpose in buying the products.

The buyers are generally registered for GST.

Procedure involved when a buyer purchases a product on your website

•         The buyer selects and purchases products on the X platform.

•         You authorise the charge to the buyer and you communicate the charge to the buyer.

•         The checkout process is completed using the X platform in conjunction with Y (a third-party payment processor). The checkout process is initiated via the X platform. When the customer adds something to their cart in the X platform, they are directed to the checkout and are taken through a regular checkout process to pay for the goods.

•         The buyer pays for the items in the X platform (payment processing is conducted by third party software in conjunction with the platform).

•         Y processes the customer payments via card etc and then deposits the money into your account.

•         You facilitate the purchase and then notify the merchant of an order so they can fulfill and deliver the order. You set some basic parameters regarding fulfillment/delivery of orders. You provide the merchants with details of the purchase, including delivery details and the timing of a product being delivered. The merchant is then solely responsible for delivery and fulfillment.

•         The merchant then invoices you for the order amount (including GST) + shipping minus the commission fee that you charge

Information about the goods sold through your website

To begin with, any goods sold through your website will already be in Australia (in the merchant's warehouse) at the time a buyer orders the goods.

A good would have a value of no more than $X.

You do not facilitate the supply of any of the following types of goods:

•         Food

•         Medical goods/health goods (for example, sunscreen)

•         Cars/car parts

•         Precious metals (as defined in the GST Act)

Information about vouchers sold through your website

Vouchers sold through the website will be

•         Credits to a vendor's store - voucher to be used in the merchant's store

•         Credits to be spent on items in the X store

Face value vouchers will be sold through the website.

Goods and services at times are sold through your website without a voucher being involved at all.

Sample written agreement you have with a merchant

The summary section of a written agreement you have with a merchant summarises the contractual arrangement you have with the merchant. It provides that:

•         you operate the web platform

•         the vendor sells their products via the web platform

•         the web platform promotes those products

No agreement under section 84-60 of the GST Act

You have not entered into a voluntary, bilateral, written agreement with any merchant under section 84-60 of the GST Act, under which the parties would treat supplies made by the merchant through your website, being supplies made by means of electronic communication, as being inbound intangible consumer supplies.

Terms of Use agreement

The written Terms of Use (of your platform) agreement makes it clear that:

•         The buyers are buying products from the merchants who will supply the products.

•         You are not the seller of the products

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 9-25

A New Tax System (Goods and Services Tax) Act 1999 subdivision 84-B

A New Tax System (Goods and Services Tax) Act 1999 subdivision 84-C

Reasons for decisions

Question 1

Summary

You are an EDP operator as:

•         your platform allows buyers to make offers for products and allows merchants to accept orders by buyers; and

•         your service to merchants is delivered by fully automated communication - a website; and

•         the requirement in relation to inbound intangible consumer supplies does not apply in your case, as the merchants are not making inbound intangible consumer supplies; and

•         the exclusions do not apply, that is:

o   you are not solely providing a carriage service; and

o   your service is not limited to supplying one or more of the following services:

§  providing access to a payment system

§  processing payments

§  providing face value vouchers.

Detailed reasoning

Section 84-70 of the GST Act defines EDP.

It states:

(1) A service (including a website, internet portal, gateway, store or marketplace) is an electronic distribution platform if:

(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) any of the supplies that are inbound intangible consumer supplies are to be made by means of electronic communication.

(2) However, a service is not an electronic distribution platform solely because;

it is:

(a) a carriage service (within the meaning of the Telecommunication Act 1997); or

(b) a service consisting of one or more of the following:

(i) providing access to a payment system;

(ii) processing payments;

(iii) providing *vouchers the supply of which are not *taxable supplies because of section 100-5.

(* Denotes a term that is defined in section 195-1 of the GST Act)

Law Companion Ruling LCR 2018/2: GST on supplies made through electronic distribution platforms (LCR 2018/2) explains the EDP rules.

LCR 2018/2 considers the EDP definition in section 84-70 of the GST Act.

Service allows entities to make supplies available to end-users

The first requirement is that the service allows entities to make supplies available to end-users.

Paragraph 24 of LCR 2018/2 states:

24. The first requirement is that the service allows entities to make supplies available to end-users. An EDP service which allows buyers to make an offer for an item, and/or which allows merchants to accept orders by buyers, will satisfy this requirement.

A reseller cannot be an EDP operator as far as their reseller arrangements are concerned. Your role in relation to the products in question is that of a selling agent. You are not a reseller of the products sold through the website.

Your platform will allow buyers to make offers for products and allow merchants to accept orders by buyers. Therefore, you will meet the first requirement of the definition of EDP, in accordance with paragraph 24 of LCR 2018/2.

Service delivered by electronic communication

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

Paragraphs 33 and 34 of LCR 2018/2 state:

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.

34. This requirement will be satisfied where the service is delivered by fully automated electronic communication, such as by a website, an automated email or an automated pre-recorded telephone call.

Your service to merchants is delivered by fully automated communication - a website. Therefore, you meet the second requirement of the definition of EDP.

Inbound intangible consumer supplies must be made by electronic communication

The third requirement is that any supplies that are inbound intangible consumer supplies must be made by means of electronic communication

Paragraph 40 of LCR 2018/2 states:

40. The last requirement is that, if the supply is an inbound intangible consumer supplythe 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.

Section 84-65 of the GST Act defines inbound intangible consumer supply. It states:

(1) A supply of anything other than goods or *real property is an inbound intangible consumer

supply if the *recipient is an *Australian consumer unless:

(a)   the thing is done wholly in the indirect tax zone; or

(b)   the supplier makes the supply wholly through an *enterprise that the supplier *carries on in

the indirect tax zone.

(2) Disregard section 84-55 in determining whether paragraph (1)(b) applies.

The indirect tax zone includes mainland Australia and Tasmania and certain other areas but excludes Australian external Territories.

References to Australia below mean the indirect tax zone, apart from the reference to Australia in subsection 9-25(7) of the GST Act.

Subsection 9-25(7) of the GST Act defines 'Australian consumer'. It states:

An entity is an Australian consumer of a supply made to the entity if:

(a) the entity is an Australian resident (other than because the definition of Australia in the

ITAA 1997 includes the external Territories); and

(b) the entity:

(i) is not registered; or

(ii) if the entity is registered - the entity does not acquire the thing supplied solely or partly

for the purpose of an enterprise that it carries on.

('Registered' means registered for GST)

Only an imported supply of a service or digital product can meet the definition of inbound intangible consumer supply in section 84-65 of the GST Act (however, there is an option in section 84-60 of the GST Act for an EDP operator and a merchant to treat supplies of digital products/digital services in certain circumstances as being inbound intangible consumer supplies where they do not meet the definition of inbound intangible consumer supplies in section 84-65 of the GST Act).

Paragraphs 55 to 58 of LCR 2018/2 provide guidance on the meaning of inbound intangible consumer supply. They state:

What is an inbound intangible consumer supply?

55. An inbound intangible consumer supply is defined 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.

56. A supply is made wholly through an enterprise that the merchant carries on in Australia if:

•         the merchant carries on an enterprise in Australia, and

•         the supply is made wholly through that enterprise.

57. A supply will not be made wholly through an enterprise that the merchant carries on in Australia where part of the supply is made by an enterprise that the merchant carries on outside of Australia.

58. Unless the EDP operator has information to the contrary at the time of the transaction, if the EDP operator's 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).

The merchants in your case will supply things other than goods or real property. Therefore, they will supply intangibles via your platform.

At this stage, all the merchants in your case are in Australia. Therefore, the suppliers of the products will make their supplies through your website wholly through enterprises that they carry on in Australia. Hence, inbound intangible consumer supplies are not made through your website. Therefore, the third requirement of the definition of EDP.is not applicable to your case.

Exclusions from the definition of EDP

Paragraphs 42 to 47 of LCR 2018/2 explain the exclusions from the definition of EDP. They state:

42. The law specifically excludes certain services that should not be regarded as an EDP. These rules ensure that the excluded services are not, on their own, an EDP.

Carriage service

43. The first exclusion from the definition of an EDP is where a service is a carriage service within the meaning of the Telecommunications Act 1997. A carriage service is a service for carrying communications by means of guided or unguided electromagnetic energy. It includes services such as those provided by an internet service provider, pay telephony and broadband, but not content services such as pay television.

Payment system or processing of payments

44. The definition of EDP excludes entities which solely provide a service of providing access to a payment system or payment processing. These services are usually only involved in the supply to the extent that they facilitate payment from the end-user to the merchant or the EDP operator.

45. A payment services provider or payment processor may act solely on the instructions of the EDP or another party to the transaction.

Face value vouchers

46. The last exclusion concerns the supply of 'face value' vouchers which are taxed on redemption or expiry. This ensures that entities whose online business includes providing a platform on which merchants sell face value vouchers, such as gift vouchers that can be redeemed for a range of supplies up to a particular monetary value, are not treated as an EDP operator solely because the vouchers were issued by the merchant through that platform. However, the EDP Operator may still be responsible for GST where the voucher is redeemed for a supply made through the EDP on redemption of the face value voucher.

47. This means that if a face value voucher is issued by a merchant through an EDP and:

•         the voucher is redeemed for a subsequent supply made through the EDP - this subsequent supply may still be a supply made through the EDP for which the EDP operator may be responsible for the GST. Where the subsequent supply is made through the EDP, the consideration for that supply will include the stated monetary value of the voucher and any additional consideration provided for that subsequent supply

•         the voucher is redeemed for a subsequent supply made by a merchant, and that subsequent supply is not made through the EDP, the merchant is responsible for any GST payable on that subsequent supply. The subsequent supply is not made through the EDP solely because it was purchased using a voucher that was issued through the EDP

•         if the voucher remains unredeemed, the merchant issuing the voucher is responsible for any increasing adjustment.

As you are not solely providing a carriage service; and you are not just supplying one or more of the following services:

•         providing access to a payment system

•         processing payments

•         providing face value vouchers,

the exclusions from the definition of EDP in subsection 84-70(2) of the GST Act don't apply.

Therefore, you are providing a service that meets the definition of EDP. Hence, you are an EDP operator.

Question 2

Summary

You are not liable for GST (if any) on sales of products made by merchants through your website as, although you are an EDP operator, the merchants are not making either of the following types of supplies through your website:

•         inbound (imported) intangible consumer supplies

•         'offshore supplies of low value goods' (such supplies involve 'low value goods' that are outside Australia at the time the buyer places their order)

Detailed reasoning

Generally, for an entity to be liable for GST on a supply of goods, services or anything else, they must be the actual supplier.

Under certain international provisions of the GST Act, an EDP operator may be treated, for GST purposes as the supplier of products made by merchants through the platform. However, these special rules do not always apply to supplies made through an EDP.

A supply is taxable for GST purposes if the requirements of section 9-5 of the GST Act are met, which 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.

('Registered' means registered for GST)

The relevant special rules in the GST Act to consider in your case are the international EDP rules, which can apply to inbound intangible consumer supplies and supplies of low value goods that are brought to Australia to meet a buyer's order.

Inbound intangible consumer supplies made through an EDP

An EDP operator who facilitates imported supplies of digital products/digital services may be treated as the supplier of such things for GST purposes under a special rule.

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

If an inbound intangible consumer supply is made through an 'electronic distribution platform', the operator 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 it carries on.

However, subsection 84-55(4) of the GST Act provides that this GST treatment does not apply in certain circumstances. It states:

Despite subsections (1) and (2), this section does not apply to an operator of an electronic distribution platform if:

(a) a document relating to the supply, issued to the recipient of the supply identifies:

(i) the supply; and

(ii) the supplier as the supplier of the supply; and

(b) the supplier and the operator of the electronic distribution platform have agreed in writing that the supplier is the entity responsible for paying GST for

(i) the supply; or

(ii) a class of supplies that includes the supply; and

(c) the operator of the electronic distribution platform:

(i) does not authorise the charge to the recipient for the supply; and

(ii) does not authorise the delivery of the supply; and

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

Section 84-65 of the GST Act defines inbound intangible consumer supply. It states:

(1) A supply of anything other than goods or real property is an inbound intangible consumer

supply if the recipient is an Australian consumer unless:

(a) the thing is done wholly in Australia; or

(b) the supplier makes the supply wholly through an enterprise that it carries on in in the indirect tax zone.

(2) Disregard section 84-55 of the GST Act in determining whether paragraph

84-65(1)(b) of the GST Act applies.

Where a supply of an intangible is made through your website, you will not be treated as the supplier pursuant to section 84-55 of the GST Act, as these supplies will not be inbound intangible consumer supplies. Hence, you will not be liable for GST on the supplies of intangibles made through your website.

Sales of low value imported goods through an EDP

Where offshore supplies of low value goods are made through an EDP, the EDP operator may be treated as the supplier and therefore potentially be liable for GST on sales of the low value goods. This is pursuant to section 84-81 of the GST Act.

Subsection 84-81(3) of the GST Act states:

Section 84-55 of the GST Act applies to a supply as if it were an inbound intangible consumer supply if:

(a) the supply is made through an electronic distribution platform; and

(b) the supply is an offshore supply of low value goods.

However, subsection 84-81(1) of the GST Act provides that section 84-81 of the GST Act does not apply to a supply to the extent that it is connected with Australia because of a provision of the GST Act other than Subdivision 84-C of the GST Act. Subdivision 84-C is the subdivision that contains the special rules for offshore supplies of low value goods.

Section 84-77 of the GST Act defines 'offshore supply of low value goods'.

Subsection 84-77(1) of the GST Act states:

A supply of low value goods is an offshore supply of low value goods if:

(a) the supply involves the goods being brought to the indirect tax zone; and

(b) the supplier delivers the goods into the indirect tax zone, or procures, arranges or facilitates the

delivery into the indirect tax zone.

Subsection 84-77(2) of the GST Act states:

Without limiting subsection (1), a supply of low value goods is an offshore supply of low value goods if:

(a) the supply involves the goods being brought to the indirect tax zone; and

(b) the supply is made through an electronic distribution platform; and

(c) the operator of the platform delivers the goods into the indirect tax zone, or procures, arranges or facilitates the delivery of the goods into the indirect tax zone.

Subsection 84-77(3) of the GST Act states:

A supply of low value goods is an offshore supply of low value goods if:

(a) the supply involves the goods being delivered to a place outside the indirect tax zone; and

(b) a redeliverer delivers the goods into the indirect tax zone, or procures, arranges or facilities the delivery of the goods into the indirect tax zone.

Paragraph 72 of LCR 2018/1 GST on low value imported goods explains the concept of offshore supply of low value goods. It states:

72. A supply will be an 'offshore supply of low value goods' under section 84-77 if:

•         it is a supply of low value goods (see paragraphs 34 to 52 of this Ruling)

•         the supply involves the goods being brought to Australia, and

•         one or more of the following occurs

o    the merchant delivers the goods to Australia or procures, arranges or facilitates delivery of the goods into Australia

o    an EDP operator delivers the goods to Australia or procures, arranges or facilitates delivery of the goods into Australia

o    a redeliverer delivers the goods to Australia or procures, arranges or facilitates delivery of the goods into Australia.

In accordance with section 84-79 of the GST Act, a low value good is an imported good with a customs value of $X or less (but the term excludes tobacco, tobacco products and alcoholic beverages)

Paragraphs 76 and 77 of LCR 2018/1 explain subsections 84-77(1) and 84-77(2). They state:

Merchant assists

76. A supply made through an EDP may be an offshore supply of low value goods under subsection 84-77(1), where it is the merchant, instead of the EDP operator, that assists in bringing the goods to Australia. The effect of this is that an EDP operator can be responsible for GST on an offshore supply of low value goods even though they do not assist in bringing the goods to Australia.

EDP operator assists

77. Subsection 84-77(2) considers the role of an EDP operator in bringing goods to Australia. The provision is only relevant if the supply is made through a platform.

78. The consequence of subsection 84-77(2) is that a supply of low value goods will be an offshore supply of low value goods if the EDP operator delivers or procures, arranges or facilitates the delivery of the goods to Australia. Therefore supplies that are made through an EDP, when the EDP operator is assisting in bringing the goods to Australia, are also offshore supplies of low value goods.

Where goods are supplied through your website, the supply will be made through an EDP. Therefore, the requirement of paragraph 84-81(3)(a) of the GST Act will be met.

However, the supply of the goods will not involve goods being brought to Australia. The goods will be located in Australian warehouses at the time buyers place their orders. The goods will be delivered by the vendors from their Australian warehouses to consignees at the request of buyers.

Therefore, the requirements are not met under subsection 84-77(1), subsection 84-77(2) or subsection 84-77(3) of the GST Act. Hence, the supplies of goods made in your case are not offshore supplies of low value goods, Therefore, the requirement of paragraph 84-81(3)(b) of the GST Act is not met. Consequently, you will not be treated as the supplier of the goods under the EDP rule in section 84-55 pursuant to subsection 84-81(3) of the GST Act. Additionally, there are no other provisions of the GST Act under which GST Act under which you would be treated as the supplier of the goods, for GST purposes.

As you will not be the actual supplier of the products sold by merchants through your website and you will not be treated as the supplier of those products under special rules in the GST Act, and no other special rules apply to make you liable for GST on these sales, you will not be liable for GST on these sales.

Further information

If your circumstances change in the future, for example, inbound intangible consumer supplies or offshore supplies of low value goods are made through the platform, the GST implications of operating the EDP may change. You may request a new ruling on whether you will have a GST liability under those new circumstances.

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