Edited version of private ruling

Authorisation Number: 1011854997479

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Ruling

Subject: GST and recipient created tax invoices

Question

Are you able to issue recipient created tax invoices (RCTIs) for aquatic products you purchase from GST registered suppliers?

Answer

Yes, you are able to issue RCTIs for aquatic products you purchase from GST registered suppliers.

Relevant facts

You operate in the seafood processing industry. You are registered for GST.

You acquire different types of seafood from local fishers and trawler fleets (your suppliers) delivered to the fishing wharves.

Your employees take possession of the seafood directly off the deck of the trawlers when they arrive at the fishing wharves. The catch is already partially frozen whilst on board the trawlers.

You process different types of seafood. You work out the value of the supplies made to you using certain methods.

You are engaged by your suppliers to determine the quantity of the loads before packaging and purchasing the loads from your suppliers.

During your processing you sort and weigh the seafood, and the information arising out of this process determines the price that you will pay your suppliers for the seafood they supplied to you.

Up to now you have been providing this information to your suppliers so they can invoice you for the seafood.

You charge back to your suppliers for the handling and processing of the seafood and is deducted from the consideration you pay to your suppliers.

You advise that it will be more efficient for you to issue RCTIs to your suppliers as you in effect determine the GST payable on the supply made to you.

Reasons for decision

Paragraph 29-70(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) provides that a tax invoice for a taxable supply must be issued by the supplier unless it is an RCTI, in which case it must be issued by the recipient.

Subsection 29-70(3) of the GST Act defines an RCTI as a 'tax invoice belonging to a class of tax invoices that the Commissioner has determined in writing may be issued by the recipient of a taxable supply.'

An entity can issue RCTIs if the Commissioner has determined in writing that the nature of the industry in which the entity operates warrants their use. Goods and Services Tax Ruling GSTR 2000/10 (GSTR 2000/10) outlines the circumstances in which a recipient is entitled to issue RCTIs. There are limitations placed on who can issue RCTIs and the circumstances in which they may be issued. 

The Commissioner has determined under subsection 29-70(3) of the GST Act that three classes of tax invoices may be issued by a recipient of a taxable supply. These classes are described in paragraphs 10-11 of GSTR 2000/10 and include: 

1. tax invoices for taxable supplies of agricultural products 

2. tax invoices for taxable supplies made to government related entities; and 

3. tax invoices for taxable supplies made to registered recipients that have a turnover of at least $20 million, or are members of a group that has such an entity as a member.

Tax invoices that come within any of these three classes can be issued by recipients without notifying or applying to the Commissioner.

However, in your case the supplies you make do not fall under the first two categories. Furthermore, your current GST turnover is less than $20 million, and the other member entities of your GST group also have current GST turnovers which are less than $20 million. As your supplies do not fall within these broad categories you cannot issue RCTIs unless the Commissioner makes or has made a determination in respect of another class of tax invoices.

As explained in paragraph 12 of Goods and Services Tax Ruling GSTR 2000/10 Goods and services tax: recipient created tax invoices (GSTR 2000/10), other GST registered recipients of taxable supplies that are not covered by the three broad classes of tax invoices can request that the Commissioner make a determination to allow them to issue RCTIs. Such requests are considered on the basis of the particular circumstances of the industry, including the nature of the taxable supplies, the suppliers and the recipients.

The Commissioner has made a number of legislative determinations under subsection 29-70(3) of the GST Act for certain classes of tax invoices that may be issued by a recipient of a taxable supply. The legislative determination that best suits your circumstances is the A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No 42) 2000 (RCTI 2000/42). The list of the remaining RCTI determinations is available from the ATO website (www.ato.gov.au).

Clause 4 of RCTI 2000/42 provides that a tax invoice for a taxable supply of aquatic products may be issued by an entity that is the recipient of that taxable supply where the recipient:

(a) establishes the value of the taxable supply by a qualitative and/or quantitative process, and

(b) satisfies the requirements set out in Clause 5.

We therefore need to determine if you meet the above requirements of Clause 4.

In Clause 6 of RCTI 2000/42 the following expressions are defined for the purposes of the determination:

aquatic products means products and by-products resulting from fishing operations.

fishing operations means operations relating directly to the taking or catching or farming of fish, crustacea or molluscs but does not include pearling operations.

qualitative and/or quantitative process means a process by which the supplied product is assessed on specified criteria such as quality or weight.

In your case, you operate in the seafood processing industry, and you acquire different types of seafood from your suppliers.

It is considered that the supplies of seafood you acquire fall within the definition of 'aquatic products' as defined above.

You are engaged by your suppliers to determine the quantity of the load before packaging and purchasing the loads from your suppliers.

During the processing of the load you handle, clean, sort, weigh, unload and grade the aquatic products, and the information arising out of this process determines the price that you will pay your suppliers for the aquatic products. You use a combination of qualitative and quantitative processes to determine the value of the supplies made to you depending upon the type of aquatic products you are processing. Although the final prices you pay your suppliers for your acquisitions are affected by daily market prices, ultimately the value of the supplies are calculated by you through the sorting and processing of these aquatic products according to their different sizes and weights.

Therefore, you establish the value of the taxable supply by a qualitative and quantitative process in accordance with the first requirement of Clause 4.

So, provided you meet the criteria set out in Clause 5 of RCTI 2000/42, Clause 4 of RCTI 2000/42 is otherwise met, and you are entitled to issue RCTIs.