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Edited version of private ruling
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Ruling
Subject: Goods and services tax and sale of solar panels
Question
How do you calculate GST on your sale of solar panels in cases where your customer has an entitlement to create certain things?
Answer
The GST payable on your sale of solar panels is 1/11th of the sum of the money you receive from your customer and the GST inclusive market value of your customer's assignment of their entitlement to create certain things to you.
Relevant facts and circumstances
You are registered for GST.
You supply and install solar panels in Australia. Your customers include business and domestic customers.
Your customers pay you money for selling solar panels to them.
Your customers are entitled to create certain things when they have solar panels installed.
Your customers assign their entitlements to create certain things to you.
You reduce the amount of money your customer has to pay for the solar panels because your customer assigns its entitlement to create certain things to you.
You create the certain things.
You sell the certain things to a third party.
Reasons for decision
Summary
The amount of GST payable on a taxable supply is 1/11th of the consideration for the supply.
The consideration for your sale of solar panels is the sum of the amount of money your customer pays you and the GST inclusive market value of your customer's assignment of their entitlement to create certain things to you.
Therefore, the GST payable on your sale of solar panels is 1/11th of the sum of the amount of money the customer pays you and the GST inclusive market value of the customer's assignment of their entitlement to create certain things to you.
Detailed reasoning
Before we consider how to calculate GST on your supplies of solar panels, we will first determine whether you have GST liabilities where you make these supplies.
You have a GST liability on taxable supplies that you make.
You make a taxable supply where you satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), 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 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.
(*Denotes a term defined in section 195-1 of the GST Act)
You are making supplies of solar panels. You satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, you make these supplies for consideration and in the course or furtherance of the enterprise that you carry on. Additionally, your supplies of the solar panels are connected with Australia and you are registered for GST.
There are no provisions in the GST Act under which your supplies of solar panels are GST-free or input taxed.
Hence, as you satisfy all of the requirements of section 9-5 of the GST Act, you make taxable supplies of solar panels, and therefore, GST is payable by you where you make these supplies.
Calculation of GST
In accordance with section 9-70 of the GST Act, the amount of GST on a taxable supply is 10% of the value of the taxable supply.
In accordance with subsection 9-75(1) of the GST Act, the value of a taxable supply is price x 10/11ths.
Price is the sum of:
(a) so far as the consideration for the supply is consideration expressed as an amount of money - the amount; and
(b) so far as the consideration is not consideration expressed as an amount of money - the GST inclusive market value of that consideration.
Therefore, the amount of GST payable on a taxable supply is 1/11th of the consideration for the supply.
In accordance with paragraph 2 of Goods and Services Tax Ruling GSTR 2001/6 consideration expressed as an amount of money is monetary consideration.
In accordance with paragraph 1 of GSTR 2001/6, consideration not expressed as an amount of money is non-monetary consideration.
Section 9-15 of the GST Act defines consideration.
In accordance with subsection 9-15(1) of the GST Act, consideration includes:
(a) any payment, or any act or forbearance, in connection with a supply of anything; and
(b) any payment, or any act or forbearance, in response to or for the inducement of a supply of anything.
Paragraph 12 of GSTR 2001/6 provides that a payment is not limited to a payment of money. It includes a payment in a non-monetary or in an 'in kind' form, such as granting a right.
In accordance with paragraphs 47 and 48 of GSTR 2001/6, whether a payment of money or a thing is consideration for a supply depends on whether there is a sufficient nexus between the supply and the payment. The provision of consideration involves a provision of something of economic value. Where one party makes a monetary payment to another, something of economic value is provided.
There is a sufficient nexus between your supply of the solar panels to your customer and your customer's payment of money to you. Additionally, your customer's payment of money to you for the solar panels has economic value. Therefore, you receive monetary consideration for your supply of solar panels, that is, the money that your customer pays you.
The assignment of the entitlement to create certain things is a non-monetary payment. Your supply of the solar panels to your customer has a sufficient nexus with the assignment of the entitlement to create certain things to you, as you reduce the amount of money that the customer has to pay you because it assigns its entitlement to create certain things to you. Additionally, the assignment of the entitlement to create certain things to you has economic value. Hence, you receive non-monetary consideration for your supply of solar panels, that is, the assignment of your customer's entitlement to create certain things to you.
Therefore, the GST payable on your supply of solar panels is 1/11th of the sum of the money you receive from your customer and the GST inclusive market value of the customer's assignment of its entitlement to create certain things to you. It makes no difference to the calculation of GST on your sale of solar panels whether your customer is a business customer or a domestic customer.
(Note that the internet article you referred to considers whether GST is payable by an entity on its sale of certain things. This is a separate transaction to your sale of solar panels.)