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Ruling

Subject: GST and recipient created tax invoice

Question

Will the Commissioner of Taxation (commissioner) make a determination to permit a seller to issue recipient created tax invoices (RCTIs) to suppliers from whom they receive acquisitions?

Advice

No, the Commissioner will not make a determination to permit a seller to issue recipient created tax invoices (RCTIs) to suppliers from whom they receive acquisitions.

Relevant facts

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

You sell products to purchasers as agent for Australian businesses ('business') with whom you have a standard Services Agreement ('agreement') and in return you receive a commission for each sale. You have provided us with a copy of this agreement.

The purchasers complete the purchase transaction with you and receive from you a voucher entitling them to receive the promoted product, a receipt and a tax invoice that detailed the GST collected and your name.

For the purposes of the GST law, the agreement provides the following:

o you will be treated as the principal in making supplies including selling the product via your website.

o You will issue tax invoices to purchasers of the product in your name and the business does not need to issue such invoices.

o As a selling agent you will issue an RCTI to the business in respect of supplies of good and related products by the business.

o The business acknowledges that they are registered for GST and they will notify you if they cease to be registered and you acknowledge that you are registered for GST and you will notify the relevant parties if you cease to be registered.

The provision of the goods and/or services as described in the product description is the business's responsibility as it is the business that provides the actual product to the purchaser of the voucher.

You are the one that calculate the value of the supply and the commission received after an offer is made. You also provide the businesses with information about the sale and commission.

You further advised that the group buying industry is a relatively new industry made up of many online businesses selling coupons to the public which can be redeemed for goods and services. These businesses offer many different products and services, but all follow the same structure - they sell coupons direct to the public, issuing a tax invoice in their own name to the purchaser, then remit the sale proceeds to the actual supplier of the goods and services, less a commission. The supplier honours the coupon (by providing the goods or services) when the purchaser presents it at their business. No second tax invoice is issued by the supplier to the purchaser.

In these circumstances, exactly as yours, the online seller (or selling agent) determines the value of the overall supply as it determines how many coupons are sold. It would be more convenient for the business to issue an RCTI along with the proceeds which are remitted to the actual supplier.

You believe an RCTI determination would be beneficial to the industry as a whole

Relevant legislative provision

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

Reasons for decision

RCTI Determinations are made under subsection 29-70(3) of the A New Tax System (Goods and Services Tax) Act 1999 ('GST Act'). This subsection states as follows:

'A recipient created tax invoice is 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.'

(Items marked with an asterisk are defined in section 195-1 of the GST Act)

Paragraph 10 of Goods and Services Tax Ruling GSTR 2000/10 (GSTR 2000/10), which deals with RCTIs, lists three broad classes of tax invoices in relation to which RCTI agreements may be entered into. These classes are established by the first Determination made pursuant to subsection 29-70(3) of the GST Act. The first such class are tax invoices for taxable supplies involving the determination of the value of agricultural products (and any by-products) subsequent to and dependent upon quantitative or qualitative analysis of the supply.

The second such class is tax invoices for taxable supplies made to registered government related entities.

The third such class is tax invoices for taxable supplies made to a registered recipient that (a) has an annual turnover, including input taxed supplies, of at least $20 million or (b) is a member of a GST group, or a member of a GST joint venture in which another member of the group, or another participant in the joint venture has such a turnover.

The design of the GST system in Australia is that the registered supplier issues the tax invoice. It is, normally, the supplier that is liable to remit the GST. It is not the practice to give on an entity-by-entity basis what in effect would be an exemption from this requirement so as to allow responsibility for issuing a tax invoice to be transferred from the particular supplier entity to the particular recipient entity.

Subsection 29-70(3) of the GST Act refers to classes of tax invoices, rather than the granting of permission to specific entities. Consistent with this, RCTI Determinations that have already issued have been in respect of broad classes rather than particular entities.

At paragraph 53, GSTR 2000/10 makes mention of industry associations making requests. This reflects the concept of there being an identified need in a particular taxpayer community for a determination. A paragraph was added to the Addendum of 27 September 2000 to include the sentence "Other registered recipients may also make requests," Determinations will only be made for broad classes of tax invoices rather than for a particular class issued by a single entity in a single situation.

After a thorough consideration of your application and circumstance, we decided that it is not appropriate for the Commissioner to make a determination in respect of your request. To make such a determination, the Commissioner must be able to identify a broad class of tax invoices that falls within the circumstances you have identified. In this instance, the Commissioner has not been able to identify such a class.

For the Commissioner to consider the issue of a new RCTI determination for a class of tax invoices, it would be necessary for you to make a 'new request' along with a class of clients who are in a similar situation.

In the event that the Commissioner decides to consider your 'new request' the process will be a long one. If a new legislative determination for this purpose is eventually issued, it would be placed in the Australian Taxation Office's website which is www.ato.gov.au and will not be issued to an applicant.