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Ruling

Subject: GST and Recipient created tax invoice

Question

Can you issue recipient created tax invoices (RCTIs) in respect of the taxable supplies of reconditioned equipments made to you?

Advice

Yes, you can issue RCTIs in respect of the taxable supplies of reconditioned equipments made to you provided you satisfy all the requirements of clause 5 of the A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax invoice Determination (No 4) 2000 (RCTI 200/4).

Relevant facts

You are an Australian company and are registered for the goods and services tax (GST).

Customers will send their equipments to you for your recycling service. At the same time you purchase the reconditioned equipments from these customers for reselling after the recycling is done. The customers are registered for GST.

You assess the conditions of the equipments and are responsible to determine the purchase value of the equipments. The suppliers are not parties to determine the equipments' purchase value.

You are considering of entering into an agreement with the customer in order to issue a RCTI in regard to the purchase of the reconditioned equipment from them.

You are seeking for the Commissioner's permission to issue RCTIs in regard to the taxable supplies of reconditioned equipments made by your customers to you because you cannot meet the basic three requirements for issuing RCTI that are stated in Goods and Services Tax Ruling GSTR 2000/10.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 paragraph 29-70(1)(a);

A New Tax System (Goods and Services Tax) Act 1999 subsection 29-70(3).

Reasons for decision

Paragraph 29-70(1)(a) of the GST Act provides that a tax invoice for a taxable supply must be issued by the supplier unless it is a RCTI (in which case it must be issued by the recipient).

Goods and Services Tax Ruling GSTR 2000/10 (available at www.ato.gov.au) outlines the circumstances in which a recipient is entitled to issue a RCTI. An entity can issue a RCTI if the Commissioner has determined in writing that the nature of the industry in which the entity operates warrants the use of a RCTI.

Paragraph 10 of GSTR 2000/10 explains that the Commissioner has determined three broad classes of tax invoices that may be issued by the recipient of a taxable supply and you have advised you do not fit within any of these broad classes of RCTIs.

However, in addition to these broad classes of RCTIs, the Commissioner has issued a number of legislative determinations in relation to specific situations, which apply to various industries.

The A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No4) 2000 (RCTI 2000/4) applies to your circumstances as you carry on a business of recycling used equipment.

Paragraphs 4, 5 and 6 of RCTI 2000/4 state:

Classes of Tax Invoices that may be issued by the recipient of a taxable supply

4. A recycler who is the recipient of a taxable supply, may issue a tax invoice that belongs to a class of tax invoices for a taxable supply of second hand goods where the recycler:

(i) establishes the value of those goods after the supply is made using a qualitative or quantitative process; and

(ii) satisfies the requirements set out in Clause 5;

Requirements that must be satisfied by a recipient of a taxable supply

5. A recipient must satisfy the following requirements:

(a) the recipient must be registered for GST when the invoice is issued;

(b) the recipient must set out in the tax invoice the ABN of the supplier;

(c) the recipient must issue the original or a copy of the tax invoice to the supplier within 28 days of making, or determining, the value of a taxable supply and must retain the original or the copy;

(d) the recipient must issue the original or a copy of an adjustment note to the supplier within 28 days of the adjustment and must retain the original or the copy;

(e) the recipient must reasonably comply with its obligations under the taxation laws;

(f) the recipient must have either:

· a written agreement with the supplier specifying the supplies to which it relates, that is current and effective when the RCTI is issued, agreeing that:

(i) the recipient can issue tax invoices in respect of the supplies;

(ii) the supplier will not issue tax invoices in respect of the supplies;

(iii) the supplier acknowledges that it is registered for GST when it enters into the agreement and that it will notify the recipient if it ceases to be registered;

(iv) the recipient acknowledges that it is registered when it enters into the agreement and that it will notify the supplier if it ceases to be registered for GST; and

(v) the recipient indemnifies the supplier for any liability for GST and penalty that may arise from an understatement of the GST payable on any of the specified supplies received on a tax invoice the recipient issues; or

· an agreement with the supplier embedded in an RCTI it issues that contains the following statement:

The recipient and the supplier declare that this agreement applies to supplies to which this tax invoice relates. The recipient can issue tax invoices in respect of these supplies. The supplier will not issue tax invoices in respect of these supplies. The supplier acknowledges that it is registered for GST and that it will notify the recipient if it ceases to be registered. The recipient acknowledges that it is registered for GST and that it will notify the supplier if it ceases to be registered for GST. The recipient indemnifies the supplier for any liability for GST and penalty that may arise from an understatement of the GST payable on any of the specified supplies received on a tax invoice the recipient issues. Acceptance of this RCTI constitutes acceptance of the terms of this written agreement.

 Both parties to this supply agree that they are parties to an RCTI agreement. The supplier agrees to notify the recipient if the supplier does not wish to accept the proposed agreement within 21 days of receiving this document.

(g) the recipient must not issue a document that would otherwise be a recipient created tax invoice, on or after the date when the recipient or the supplier has failed to comply with any of the requirements of this determination.

(h) if the recipient has a current GST turnover of less than $1,000,000, it must notify the Commissioner in writing of the recipient's intention to use recipient created tax invoices. This notification must be made before 14 days have elapsed after the first occasion that a recipient created tax invoice is issued by that recipient.

Definitions

6. The following expressions are defined for the purposes of this determination:

recycler means an entity that principally acquires second hand goods for reworking into a usable form. This includes goods such as paper, metal, glass and plastics.

Accordingly, if you satisfy all the requirements of clause 5 in RCTI 2000/4 you can issue RCTIs for taxable supplies of reconditioned equipments made to you by your customers.