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Ruling

Subject: GST and attribution of taxable supply of solar power

Question

Under the Plan is the goods and services tax (GST) payable on the initial issue of a tax invoice for the value of the deposit and then on the issue of a tax invoice in respect of each subsequent monthly payment as each payment becomes due and payable?

Advice

No. Under the Plan GST is not payable on the initial issue of a tax invoice for the value of the deposit and then on the issue of a tax invoice in respect of each subsequent monthly payment as each payment becomes due and payable

The basic attribution rule in subsection 29-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) applies to the taxable supply made under the Plan. This means the GST payable on the taxable supply is attributable to the earlier of the tax period in which any consideration for the supply is received or an invoice for the supply is issued.

Relevant facts

You operate a retail business selling amongst other things domestic solar power system. You are registered for GST and account your GST on an accrual basis.

You intend to introduce a new sales offer plan (Plan) which will allow customers to pay the contract value of a new solar power system by way of a nominal up-front deposit and equal instalments payments over a determined period. We have received a copy of the contract for the proposed Plan.

Normally, a deposit will be taken on the signing of the contract. A separate tax invoice will be issued to the customer for the deposit and GST is applicable to the deposit. Subsequently a separate tax invoice will be issued each time the customer makes the monthly payment by the due date.

Under the terms of the proposed contract the title of the goods does not pass to the customer until the final instalment is made. It is explicit in the contract that should the customer discontinue payments that you can retain the goods without the requirement for a refund from you and there is no further obligation for payments by the customer.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 29-25(1); and

A New Tax System (Goods and Services Tax) Act 1999 subsection 156-5(1).

Reasons for decision

Basic attribution rules

Division 29 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) establishes basic rules for the attribution of GST and input tax credits (basic attribution rules).

Under subsection 29-5(1) of the GST Act if you do not account for GST on a cash basis, you attribute all the GST payable on a taxable supply to the earlier of the tax period in which:

· any of the consideration for the supply is received; or

· an invoice for the supply is issued.

This means that you may have to account for GST payable on a supply before actually receiving payment for the supply.

An invoice is a document notifying an obligation to make a payment. An invoice does not necessarily contain all the information required for it to be a tax invoice.

Special attribution rules

Division 156 of the GST Act alters the application of the basic attributions rules in circumstances where the supply or acquisition and the consideration occur periodically or progressively. It does this by treating each periodic component of the supply or acquisition as a separate supply or acquisition (subsection 156-5(1) of the GST Act). Division 156 of the GST Act (other than section 156-15 of the GST Act) applies only to entities that account for GST on a basis other than cash.

Subsection 156-5(1) of the GST Act applies where a taxable supply is made for a period or on a progressive basis and in either case, consideration is made on a progressive basis or on a periodic basic. Both conditions need to be satisfied for subsection 156-5(1) of the GST Act to apply to the taxable supply.

There is no requirement in subsection 156-5(1) of the GST Act that the way in which consideration is provided must correspond to the way in which the supply is made. For example, a supply on a progressive basis can be made with periodic payments.

Goods and Services Tax Ruling GSTR 2000/35 (available at www.ato.gov.au) provides guidelines on specific circumstances in which Division 156 of the GST Act applies. The following information has been extracted from the GST ruling

Supply made for a period or on a progressive basis

A supply you make is for a period when it is made over a specified length of time or for a time with an identifiable end point. A supply for a period will be one which is made on a continuous basis until the stipulated end point occurs, or the period expires. An example of a supply for a period is a contract for the supply of maintenance services for a period of 12 months (paragraph 25 and 26 of GSTR 2000/35).

A supply you make is on a progressive basis when the contract or agreement provides for stages of the supply during the course of the supply. A supply may also be a progressive supply where, under a contract, goods or services are to be supplied on an ongoing basis. An example of a supply on a progressive basis is a contract for supply of property management services by a real estate (paragraph 27 of GSTR 2000/35).

Consideration made on a progressive basis or on a periodic basic

You provide consideration on a progressive basis when it is paid by instalments that reflect stages of a supply or acquisition, for example progress payments on a house construction contract.

You provide consideration on a periodic basis when it is made in equal or unequal instalments provided upon expiration of specified periods. An example of consideration on a periodic basis is where payments are made monthly under an agreement to lease a building.

In your case, the information received (including the proposed Plan contract) does not indicate that the supply of the solar power will be made for a period (that is on a continuous basis) or on a progressive basis (that is on an ongoing basis) although you will agree on a payment arrangement which will allow the customer to pay on a regular basis. Subsection 156-5(1) of the GST Act will not apply to your supply of solar power under the Plan in this instance.

As you account for GST on a non-cash basis you will be required to apply the basic attributions rules in accordance to subsection 29-5(1) of the GST Act for the taxable supply you made under the proposed Plan. This means, you will attribute the GST payable on the taxable supply of the solar power to the earlier of the tax period in which:

· any of the consideration for the supply is received; or

· an invoice for the supply is issued.