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Ruling

Subject: GST and tax invoice

Question

Will the Commissioner accept the proposed billing presentation for the service bundle as a tax invoice under section 29-70 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the Commissioner will accept the proposed billing presentation for the service bundle as a tax invoice under section 29-70 of the GST Act.

Relevant facts and circumstances

You are registered for GST.

You account on a non-cash basis.

You are launching a new services bundle which contains a number of elements for a period of time.

The bundle will include a mandatory hardware required to facilitate access to the full range of the bundled services.

You will charge your customer for the service bundle by an equal monthly amount over the contract period.

The proposed tax invoice will show:

· 'Service bundle for the month of … includes a mandatory hardware (total price $xxx - $xx GST incl.)',

· the new charges for the month and the GST included in the new charges.

You will remit the full amount of GST payable for the mandatory hardware upfront to the Commissioner notwithstanding the fact that you receive this GST from the customer over the contract period.

Your customer will be able to ascertain the total GST amount for the service bundle by multiplying the monthly GST amount over the contract period.

Your customer will be able to calculate the GST referable to the services by deducting the GST referable to the mandatory hardware from the total GST for the service bundle.

The various elements in the bundle will be detailed within the customer contract.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 7-1,

A New Tax System (Goods and Services Tax) Act 1999 section 9-5,

A New Tax System (Goods and Services Tax) Act 1999 section 9-10,

A New Tax System (Goods and Services Tax) Act 1999 section 9-15,

A New Tax System (Goods and Services Tax) Act 1999 section 29-5,

A New Tax System (Goods and Services Tax) Act 1999 subsection 29-70(1),

A New Tax System (Goods and Services Tax) Act 1999 subsection 29-70(1A),

A New Tax System (Goods and Services Tax) Act 1999 subsection 29-70(1B),

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

A New Tax System (Goods and Services Tax) Act 1999 section 195-1.

Reasons for decision

Section 7-1 of the GST Act provides that GST is payable on taxable supplies.

A supply will be a taxable supply if pursuant to section 9-5 of the GST Act:

· you make the supply for consideration

· the supply is made in the course or furtherance of an enterprise that you carry on

· the supply is connected with Australia, and

· you are registered, or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Section 9-10 of the GST Act defines a 'supply' as 'any form of supply whatsoever' and includes amongst other things:

· a supply of services

· an entry into or release from an obligation to do anything or to refrain from an act or to tolerate an act or situation, or

· any combination of any two or more of the matters referred to above.

The definition of 'consideration' includes any payment, act or forbearance which is 'in connection with a supply of anything' or 'in response to or for the inducement of a supply of anything' (section 9-15 of the GST Act).

Mixed supply

A supply may be characterised as consisting of one or more things or parts. That is, the supply may be regarded as commercially distinct in its own right or it may be regarded as having several identifiable parts. Paragraphs 43 and 44 of Goods and Services Tax Ruling GSTR 2001/8 (GSTR 2001/8) state:

43. A mixed supply is a single supply made up of separately identifiable parts, where one or more of the parts is taxable and one or more of the parts is non-taxable, and these parts are not integral, ancillary or incidental in relation to a dominant part of the supply. On the other hand, a composite supply is a single supply made up of one dominant part and other parts that are not treated as having a separate identity as they are integral, ancillary or incidental to the dominant part of the supply.

44. In working out whether you are making a mixed or composite supply, the key question is whether the supply should be regarded as having more than one separately identifiable part, or whether it is essentially a supply of one dominant part with one or more integral, ancillary or incidental parts.

Paragraphs 64 to 69 of the GSTR 2001/8 provide guidance on package deals. Some relevant paragraphs are cited below.

64. Many transactions consist of a variety of things packaged for a single consideration. ³⁶ Particularly in a promotional package, the supply of one part often depends in some way on the supply of the other parts. The parts do not have to be physically packaged together to constitute a package deal.

65. For example, goods are often offered together in one promotion for a single price, such as buy one and get one free, buy two for the price of one, or buy three for the price of two.

66. Whether you characterise a package deal as being mixed or composite depends on the factors discussed at paragraphs 40 to 63 of this Ruling. The package deal may be a composite or a mixed supply, depending on all of the circumstances.

In your case, your service bundle includes a range of services and a mandatory hardware. The package will be a mixed supply made up of separately identifiable parts, where all the parts are taxable supplies.

Progressive and periodic supplies

Division 156 of the GST Act alters the application of the basic attribution 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.

Under subsection 156-5(1) of the GST Act, the GST payable by an entity on a taxable supply that is made:

· for a period or on a progressive basis, and

· for consideration that is to be provided on a progressive or periodic basis

is attributable, in accordance with section 29-5 of the GST Act, as if each progressive or periodic component of the supply were a separate supply. The input tax credits to which an entity is entitled for a creditable acquisition that is made for a period or on a progressive basis and for consideration that is to be provided on a progressive or periodic basis is attributable, in accordance with section 29-10 of the GST Act, as if each progressive or periodic component of the acquisition were a separate acquisition.

In your case, the supplies of the range of services are periodic supplies except for the supply of the mandatory hardware.

Attribution of GST

Division 29 of the GST Act establishes the basic rules for the attribution of GST. Where an entity accounts for GST on a basis other than cash, as is your case, subsection 29-5(1) of the GST Act provides that all the GST payable on a taxable supply is attributable to the earlier of the tax periods when:

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

· an invoice relating to the supply is issued.

In your case, you advise that you will remit the full amount of the GST payable upfront to the Commissioner for the supply of the mandatory hardware, to the tax period when the customer is first issued with an invoice for the bundled product in accordance with the operation and effect of section 29-5 of the GST Act.

In regards to the GST payable in relation to the supplies of the range of services, you will attribute and remit the GST payable, progressively as the customer is invoiced each month in accordance with the operation and effect of Division 156 of the GST Act.

We consider your treatment above to be consistent with the GST Act requirements.

Tax Invoices requirements

Tax invoices are key integrity measures under the GST system. It is therefore important that a tax invoice contains the required information and is issued in a timely manner according to paragraph 11 of ATO Practice Statement Law Administration PS LA 2004/11.

The Commissioner has expressed his preliminary view about the way the law applies on tax invoices in Draft Goods and Services Tax Ruling GSTR 2012/D3 (GSTR 2012/D3). Paragraph 69 states:

69. A tax invoice is a document that complies with the following requirements:

· it is issued by the supplier of the supply or supplies to which the document relates (paragraph 29-70(1)(a);

· it is in the approved form (paragraph 29-70(1)(b);

· it contains enough information to enable the following to be clearly ascertained:

- the identity and ABN of the supplier (subparagraph 29-70(1)(c)(i);

- the identity or ABN of the recipient if the total price of the supply or supplies is at least $1,000 or such higher amount as the regulations specify (subparagraph 29-70(1)(c)(ii);

- what is supplied, including the quantity (if applicable) and the price (subparagraph 29-70(1)(c)(iii);

- the extent to which each supply included on the document is a taxable supply (subparagraph 29-70(1)(c)(iv);

- the date the document is issued (subparagraph 29-70(1)(c)(v);

- the amount of GST (if any) payable in relation to each supply included on the document (subparagraph 29-70(1)(c)(vi); and

- such other matters as the regulation specify (subparagraph 29-70(1)(c)(viii);

· it can be clearly ascertained from the document that the document was intended to be a tax invoice (paragraph 29-70(1)(d); and

· it sets out the GST branch registration number of the GST branch (if applicable) section 54-50(1)).

Enough information to ascertain clearly

(a) what is supplied, the quantity and the price of what is supplied

On the facts provided, the proposed tax invoice will just show 'Service bundle for the month of … includes a mandatory hardware (total price $xxx - $xx GST incl.)'. There is no detail of the elements involved in it. As such, the proposed tax invoice, does not contain enough information to ascertain clearly what is supplied.

Your customers understand that they are acquiring a bundle of services with a mandatory hardware for an equal monthly payment over the contract period.

As such, the total price of the services bundle can be ascertained by multiplying the monthly instalment by the number of months involved.

Your customers will also be able to ascertain the total price related to the service component by deducting the price for mandatory hardware from the total price of the service bundle.

Consequently, the requirement under subparagraph 29-70(1)(c)(iii) of the GST Act may not be satisfied as it do not contain enough information to ascertain clearly what is supplied.

(b) the amount of GST payable in relation to each supply

In your case, though the proposed tax invoice provided contains information in relation to the price and amount of GST for the supplies aggregated together, there is a disclosure in bill stating the price of the mandatory hardware and its related GST.

As discussed above and from the facts provided, the customers will be able to ascertain the GST referrable to the services components by deducting the GST on mandatory hardware from total GST charged over the contract period.

It follows that the proposed tax invoices do contain enough information to enable the amount of GST payable in relation to each supply to which the document relates, to be clearly ascertainable.

Consequently, the requirement under subparagraph 29-70(1)(c)(vi) of the GST Act will be satisfied.

As such, we consider that the proposed tax invoice does not contain enough information to clearly ascertain the thing or things supplied.

Use of other documents by the recipients

Where a recipient receives a document that is intended to be a tax invoice but it does not contain all of the required information, the document may be treated as a tax invoice by the recipient if the missing information is able to be ascertained from one or more other documents issued by the supplier as provided under subsection 29-70(1A) of the GST Act.

Paragraphs 40 and 41 of GSTR 2012/D3 examine the circumstances under subsection 29-70(1A) of the GST Act when a recipient of a document for a supply can treat that document as a tax invoice even though it does not meet all of the tax invoice requirements as below:

40. A document issued by the supplier that does not meet all of the tax invoice requirements may be treated by the recipient as a tax invoice if:

· it would be a tax invoice but for the missing information; and

· all of that missing information can be clearly ascertained from other documents given to the recipient by the supplier.²¹

41. Particular information is missing if the document does not contain the required information to be a tax invoice. This will occur if either:

· there is no information regarding the relevant particular; or

· the document contains information about the particular but that information is incomplete or incorrect, for example, if it contains a transposition error in the ABN then the ABN is missing information as the document does not contain the correct ABN.

In your case, you advised that the customer contract will provide detail of the elements of the services bundle.

As such, the customer contract together with the above proposed tax invoice which has a separate disclosure 'includes a mandatory hardware (total price $xxx - $xx GST incl.) will enable the recipient to rely on subsection 29-70(1A) of the GST Act to treat the proposed tax invoices as a tax invoice for the purposes of the GST Act.

Accordingly, the proposed tax invoices, may be treated by the recipient as a tax invoice for GST purposes.