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Edited version of private ruling
Authorisation Number: 1011593768261
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Ruling
Subject: GST on the supply of solar panels with RECs
Question
Are you correctly invoicing your customers on the supply of solar panels, where you account for GST on the gross amount before the RECs are deducted?
Answer: Yes.
You are correctly invoicing your customers on the supply of solar panels by charging GST on the gross amount before deducting the RECs discount.
Relevant facts
You advised us of the following facts:
You are registered for goods and services tax (GST).
You are a supplier of solar panels and heat pumps.
Most of your customers are not registered for GST.
You currently provide a point of sale discount to your customers when purchasing solar and heat pump products.
You invoice the customer a point of sale discount for Renewable Energy Certificates (RECs) offered by the government.
You sell solar panels for a GST inclusive price. You reduce this gross amount by the Renewable Energy Certificates (RECs) to householders but calculate GST on the gross figure.
You have supplied a copy of a tax invoice to a customer which shows that you sold a solar product and then offered a REC discount to receive a net payment from the customer. You account for GST on 1/11th of the gross payment for a GST liability.
Relevant legislative provisions
Section 9-5 of GST Act
Reasons for decision
Detailed reasoning
Why we have made this decision:
Under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), the GST consequences of each supply has to be accounted for separately. There is no provision to net off supplies and apply GST to the net figure.
Under section 9-5 of the GST Act, 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.
The sale of a solar panel is a supply from you to the customer for consideration. As the other requirements of section 9-5 of the GST Act have been satisfied, the sale of a solar panel heater is a taxable supply. In the example you used in your letter, you supply a solar panel for $6,000 including GST on your tax invoice to the customer.
Under the Renewable Energy (Electricity) Act 2000 (REE Act) and the relevant regulations, if certain requirements are satisfied, on purchasing and installing a solar water heater, the customer acquires a right to create a certain number of RECs. The customer can assign this right to another entity for an agreed consideration.
Under paragraph 9-10(2)(e) of the GST Act, an assignment of any right is a supply. If the customer assigns their right to you, it will be a supply from the customer to you. If the customer is not registered for GST or required to be registered, under section 9-5 of the GST Act, the assignment of the right will be a supply not subject to GST.
As the customer is not registered or required to be registered, the payment of the RECs amount will not be consideration for a taxable supply. You would incur a GST liability equal to 1/11 of the gross price.
Accordingly, you are correctly invoicing your customers by calculating GST on the gross price of the solar panels.