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Ruling

Subject: GST and entitlement to input tax credits - environmental rebate programs

Question 1

Do you make creditable acquisitions pursuant to Division 11 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) in providing rebates under the rebate programs that you administer?

Answer

Yes.

Relevant facts and circumstances

You are registered for GST.

You provide incentive programs to encourage sustainable living.

Eligible applicants are individuals who install sustainable products.

Applicants are not entitled to claim the rebate amount or receive funds directly from you. You only make payments of the rebates through participating suppliers.

A participating supplier provides the rebate to the eligible applicant as a point-of-sale discount on the retail price of the relevant goods and installation.

Prior to providing the discount, the supplier must assess the eligibility of the applicant against set criteria.

Where the criteria are met, the applicant's details are entered into a system to calculate the amount of rebate that applies, and to seek pre-approval from you that the rebate will apply to the installation.

If pre-approval is not obtained prior to installation you will not pay the corresponding amount to the supplier.

Application and installation reports must also be completed by the supplier and applicant in order for the rebate to be paid.

Once pre-approval has been obtained, the supplier must arrange for the installation of the system by a licensed installer who is also registered with the program. They are provided with the rebate application and report forms.

The installer and eligible applicant complete relevant documentation and must submit this within the appropriate timeframe.

The supplier invoices the applicant for the full amount for the supply and installation (GST inclusive) less the rebate amount.

Pursuant to a written agreement between participating suppliers and you, you pay the rebate amount to the supplier after the installation has occurred and the relevant documentation has been received.

Relevant legislative provisions

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

Division 9

Division 11

Reasons for decision

Summary

You make creditable acquisitions in providing rebates under the sustainable living rebate programs that you administer.

Detailed reasoning

Under the relevant schemes there is an arrangement between you and the participating suppliers, under which the public can acquire eligible goods or services from the participating supplier and receive the rebate amount as a discount at the point-of-sale. Under this arrangement you subsequently pay the rebate amount directly to the participating supplier when all the requirements of the scheme are met. These requirements are set out in writing between you and the supplier.

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:

§ 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.

§ 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.

§ 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.

§ 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)

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

§ 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 indicate that there is a supply being made to you, this will mean that there are two supplies being made by the participating supplier - to you and to the eligible applicant.

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

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

The rebate program documents set out the agreement governing the parties and require 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 by meeting certain requirements and 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 meet certain eligibility requirements, and their eligibility is determined by the participating supplier making an assessment against the criteria. An application and acceptance under the scheme means that all parties must agree to the terms and conditions of the scheme.

Once pre-approval has been given you assume liability to make payments to the authorised supplier under the arrangement, provided that the system is then installed within the required timeframe and the paperwork provided to you.

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

The agreement specifically provides that where the requirements of the scheme are met by the participating suppliers then you will pay the rebate amount to them 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 participating supplier knows that when the goods and services are provided to the eligible customer, who has submitted their form and met all the requirements, that you are obliged to pay the rebate amount.

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. Where this occurs there is a liability owed by you that is established by the terms of the arrangement.

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 agreement makes this requirement clear. We consider that the liability is owed by you at the time of supply.

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 therefore consider that a supply is made to you pursuant to a pre-existing arrangement between you and the participating suppliers, and that the payment by you is consideration for the provision of the eligible goods and services.

The supplies by the participating 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).

Therefore, you are entitled to input tax credits.