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Ruling

Subject: GST and supply of a right to receive a GST-free supply

Question 1:

Is the supply made by the Licensee to a client to attend a GST-free Vendor course a GST-free supply under paragraph 9-30(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer:

Yes.

Question 2:

While the arrangements outlined in an earlier GST private ruling issued to the Vendor continue (that there is no separately identifiable consideration passing from the Vendor to the Licensee), does the Licensee make taxable supplies of services to the Vendor?

Answer:

No.

Relevant facts and circumstances

The Licensee is registered for GST. The Vendor has entered into a Licensee agreement (Agreement) with the Licensee authorizing the Licensee to market, promote, sell, deliver, facilitate and service the products developed by the Vendor.

The Licensee makes an upfront payment which covers the initial supply of various materials and services which enables him to commence operation. GST is charged on all components of this supply except for the GST-free supply of training provided by the Vendor to the Licensee. Where GST is charged, the Licensee is entitled to input tax credits.

The Licensee markets the Vendor's courses to various entities or clients who will enrol, through the Licensee, any number of their staff as appropriate to attend various courses. The earlier GST private ruling that issued to the Vendor confirms that the Licensee supplies its clients with the right to receive a course of the Vendor's. The GST private ruling also confirms that because the supply of a course of the Vendor's is a GST-free supply, the supply of the right to receive the course is also GST-free.

Further, the private ruling confirms that although the Licensee makes supplies of services to the Vendor, there is no separately identifiable consideration for those supplies and those supplies are, therefore, not taxable supplies.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-30

Reasons for decision

Question 1:

Summary

The supply of the right to receive a GST-free supply is also GST-free.

Detailed reasoning

Where the Licensee acts within the Agreement, the supply he makes to the clients is a supply of a right to participate in an accredited course to be provided by the Vendor. The Licensee does not provide the accredited courses in its capacity as a licensee.

Our view is that the Vendor supplies the courses to the clients, and those courses are GST-free, regardless of whether the courses are facilitated by the Vendor's employees or the Licensee.

Paragraph 9-30(1)(b) of the GST Act provides that a supply of a right to receive a supply that is a GST-free under Subdivision 38-C of the GST Act is also GST-free supply.

Therefore, the Licensee's supply of a right to receive a GST-free course to be provided for by the Vendor is GST-free.

Question 2:

Summary

The Licensee does not make taxable supplies to the Vendor as there is no consideration received in return for those supplies.

Detailed reasoning

Section 9-5 of the GST Act provides that an entity is making a taxable supply when all of the following requirements are met:

· the entity makes the supply for consideration;

· the supply is made in the course or furtherance of an enterprise carried on by the entity;

· the supply is connected with Australia;

· the entity is registered or required to be registered for GST; and

· the supply is neither GST-free or input taxed.

As the vendor does not provide the Licensee with any consideration for the services, one of the requirements above is not met and therefore the Licensee does not make taxable supplies to the Vendor.