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Ruling

Subject: GST and entitlement to input tax credits - Rebate Water Conservation Scheme

Question 1

Do you make a creditable acquisition in providing rebates under a water conservation scheme?

Answer

Yes

Question 2

Do you make a creditable acquisition in paying the voucher amounts for vouchers provided under the water conservation scheme?

Answer

Yes

Relevant facts and circumstances

· You are a government entity. You are registered for GST.

· The scheme provides rebates to property owners or tenants, including commercial premises and community groups (applicants) in particular locations.

· Persons building a new home are not eligible as the scheme is aimed at improving water efficiency through retrofitting.

· The scheme provides rebates for specified product purchases and rebates for specified plumbing services.

· Retailers and plumbers who want to participate in the scheme make a request to you, and you provide them with a registration form and a copy of the Terms and Conditions for the scheme.

· These suppliers are not eligible to participate in the scheme until they have completed the form and checks have been performed (such as ABN, GST registration, plumbers licensing).

· You list the name of participating suppliers on your website.

· There is no entitlement to the rebate directly from you. Rebates must be claimed at the point of sale.

· Rebates are provided at the point of sale by the retailer where an applicant submits a rebate claim form to the retailer when they pay for a product, or by the plumber when an applicant submits a rebate claim form when paying for the plumbing service.

· The supplier deducts the rebate from the GST-inclusive price, and receives the balance from the applicant. The supplier then submits an invoice to you for payment of the rebate.

· The supplier submits an invoice to you with a copy of the invoice issued to the customer detailing the supply of goods or services provided. You check that the supply is eligible for the rebate, and where it is makes payment of the rebate amount directly to the supplier's bank account.

· Currently, the GST charged by the supplier to the end consumer is 1/11^th of the price prior to the deduction of the rebate. The invoice submitted to you for payment of the rebate does not include GST. You do not claim an input tax credit in respect of the rebate.

Home water audits

· Residents identified as having high water consumption by their water supplier are referred to a non-profit association who offers to provide home water audits (the auditor).

· As an incentive to participate, a voucher is offered. This is issued in the participant's name by you on advice from the auditor.

· The voucher may be used to reduce the cost of products or services from eligible suppliers. The vouchers must be applied to reduce the cost of an eligible product or service.

· Once the audit has been undertaken a report is prepared setting out water savings that could be made by the participant.

· Where appropriate the auditor recommends the issue of garden vouchers to the participant.

· You issue garden vouchers to the participant to undertake the work identified in the audit report. The vouchers are for specified irrigation products or services from a registered supplier and are subject to terms and conditions.

· Suppliers must submit the vouchers to you with an invoice for payment. A copy of the supplier's invoice to their customer must also be attached to confirm that the name on the voucher is the same as on the customer invoice and that eligible products or services have been supplied.

· All vouchers are non-transferable and are subject to an expiry date.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Division 9

Division 11

Reasons for decision

Question 1

Summary

You make creditable acquisitions in providing rebates for plumbing goods and services under the scheme.

Detailed reasoning

Under the scheme there is an arrangement between you and the authorised suppliers, under which the public can directly acquire eligible goods or services from the authorised supplier. Under this arrangement you pay the rebate amount directly to the authorised supplier on the provision of those goods or services.

In these circumstances it is necessary to determine whether both you and the eligible purchasers are both recipients of a supply in relation to the transaction.

The following factors may, in combination, point to a supply being made by the supplier to you (the payer) in an arrangement where goods are provided to a customer (see paragraph 221B of GSTR 2006/9DA). These include:

1. There is a pre-existing framework or agreement between the payer and the supplier which contemplates that the parties act in a particular manner in respect of supplies that are to be provided by the supplier to particular third parties or a class of third parties.

2. The pre-existing framework or agreement identifies a mechanism by which the particular third parties or the class of third parties are to be identified such that the supplies provided to them come within the scope of the framework.

3. The pre-existing framework or agreement specifies that the payer is under an obligation to pay the supplier if the supplier provides a relevant supply to a third party and also sets out a mechanism by which such payment is authorised.

4. The framework or agreement and the mechanism for authorising the payment are in existence before the supplier provides the supply to the third party (ie the supplier knows in advance that the payer is obliged to pay some or all of the consideration where that supply is provided to the third party)

5. The supplier provides the supply to the third party in conformity with the pre-existing framework or agreement between the parties; and

6. The obligation of the payer to make payment pursuant to the pre-existing framework or agreement is not an administrative arrangement to pay on behalf of the third party for a liability owed by the third party to the supplier. Rather, once the supply becomes a supply to which the framework or agreement applies, the framework or agreement establishes a liability owed by the payer (not the third party) to the supplier in the event that the supplier provides the relevant supply to the third party.

Where the above factors point to a supply being made to you there will be two supplies being made by the supplier.

Pre existing framework for the supplier to act in a particular manner

There are arrangements between you and the authorised suppliers which provide the framework for the scheme.

The registration form and Terms and Conditions document set out the agreement governing the parties and requires the authorised suppliers to act in a particular manner in respect of point of sale discounts on eligible supplies. Specifically, the arrangement requires authorised suppliers to charge the lesser amount and claim back the difference from you (providing relevant documentation).

Mechanism for identifying eligible recipients

The requirement that there be a mechanism for identifying eligible recipients is also satisfied in these circumstances.

Eligible recipients submit a claim form to the retailer or supplier. They are required to abide by the terms and conditions of the scheme. Specifically, they must declare that they meet eligibility criteria such as that they are not building a new home, and that they don't claim each rebate item more than once per property per financial year.

Where a claim form is submitted you assume liability to make payments to the authorised supplier under the arrangement.

Requirement to pay the supplier and an established mechanism for making payment

The terms and conditions agreed to under the scheme specifically provide that if particular goods or services are provided by eligible suppliers then you will pay the rebate amount to the supplier. You have a framework in place whereby rebate amounts must be claimed by suppliers in a specified format and within a specified time.

Supplier knows that where the supply is made that you will pay

As discussed above, the supplier knows that if the goods or services are provided to the eligible customer, who has submitted their form, that you are obliged to pay the rebate amount. This is a liability owed by you and is established by the terms of the arrangement.

Liability is owed by you

Your liability under the arrangement must arise at the time of the supply for there to be a supply to you. A supply is only made to you in circumstances where the eligible supplies have been provided to the customer and it has been established at that time that they are eligible under the scheme.

A supply is not made to you if there was merely an arrangement to pay on behalf of the third party for a liability already owed by the third party. For example, if the supply has already taken place and the customer later realises they may have been eligible for a rebate and tries to claim this. The arrangements under the scheme must take place at the time of the supply for a supply to have been made to you. Your agreements under the terms and conditions make this requirement clear.

Supplier provides the supply in accordance with the pre-existing framework or agreement

Where the requirements of the arrangement between you and the suppliers are followed, there will also be a supply to you when the supplier provides eligible supplies to an eligible customer. We consider that a supply is made to you pursuant to a pre-existing arrangement between the parties, and the payment by you is consideration for the provision of the eligible goods or services.

The supply by the suppliers to you will be taxable supplies because they have provided a supply for consideration in the course of their enterprise, the supply is connected with Australia and they are registered for GST (section 9-5 of the GST Act).

As the supplier is making two taxable supplies, that is, one to you and one to the eligible purchaser, the supplier is required to pay GST on both supplies. The consideration for each of these supplies will equal the extent of each party's liability associated with the purchase of eligible goods or services under the scheme. The tax invoices issued by the supplier to you and the eligible purchaser should reflect this.

As the supplies to you are taxable supplies, you have provided consideration and are registered for GST this meets all the requirements of section 11-5 of the GST Act.

You have made creditable acquisitions as you have acquired the service in carrying out your enterprise and it is not in relation to making supplies that are input taxed or private or domestic (section 11-15 GST Act). You have acquired the service as part of your enterprise, as an enterprise includes an activity or series of activities done by the Commonwealth, a State or a Territory (section 9-20 GST Act).

Therefore, you are entitled to input tax credits.

Question 2

Summary

You make a creditable acquisition in paying amounts associated with the redemption of vouchers issued under the scheme.

Detailed reasoning

Under this aspect of the scheme, you issue vouchers to eligible participants (people who undertake home water audits). Vouchers may be used to reduce the cost of particular products or services from eligible suppliers.

We consider that the reasoning used above applies to these vouchers also.

There is a pre-existing framework in place between you and the suppliers. The suppliers know that when a voucher is presented you are liable to pay the amount to them. Suppliers must submit the vouchers to you with an invoice for payment. They also provide documentation to show that eligible products or services have been supplied to the eligible customer.

Where the requirements of the arrangement between you and the suppliers are followed, there will also be a supply to you when the supplier provides supplies to an eligible customer. We consider that a supply is made to you pursuant to a pre-existing arrangement between the parties, and the payment by you is consideration for the provision of the eligible goods or services.

The supply by the suppliers to you will be taxable supplies because they have provided a supply for consideration in the course of their enterprise, the supply is connected with Australia and they are registered for GST (section 9-5 of the GST Act).

As the supplier is making two taxable supplies, that is, one to you and one to the eligible purchaser, the supplier is required to pay GST on both supplies. The consideration for each of these supplies will equal the extent of each party's liability associated with the purchase of eligible goods or services under the scheme. The tax invoices issued by the supplier to you and the eligible purchaser should reflect this.

The supplies to you are taxable supplies, you have provided consideration and are registered for GST, and so this meets all the requirements of section 11-5 of the GST Act.

Therefore, you are entitled to input tax credits for the amounts paid in relation to vouchers you have issued.