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Ruling

Subject: GST and supplies

Question

How is the reimbursement paid to a member of a particular industry (member) for the cost of purchased goods treated for GST purposes?

Answer

There is no supply of the goods hence the reimbursement should be treated as part of the consideration paid for the member's supply.

GST is payable on the full amount received for the member's supply which includes the reimbursement.

Relevant facts and circumstances

· You are registered for goods and services tax (GST).

· You represent the members who make supplies.

· A member is registered for GST.

· A member purchases goods to enable them to make their supply.

· There is no agreement (written or otherwise) in place between a member and their customers to supply the goods to their customers or to any third party. A member can dispose of the goods in the manner of their choosing.

· When a member invoices their customers they separately itemise the cost of the goods.

Reasons for decision

No supply of goods

The ATO view on supplies for GST purposes is provided by the goods and services tax ruling (GSTR) 2006/9 (available from the ATO website www.ato.gov.au).

This ruling provides that a supply for GST purposes generally requires there is something that passes from one entity (the supplier) to another (the recipient). Further to this, the Commissioner of Taxation considers that an agreement that does not bind the supplier and recipient in some way is not sufficient to establish there is a supply.

In your case, a member purchases goods to enable them to make their supply. However, there is no agreement (written or otherwise) in place between a member and their customers in relation to the goods. A member is not required to supply the goods to their customers or to any third party and can dispose of the goods in the manner of their choosing.

Given this, and following the guidance of GSTR 2006/9, there is no supply of goods to a member's customer, only the member's supply.

Separately itemise the cost of the goods

When a member invoices their customer they separately itemise the cost of the goods. This cost is an expense incurred by the member to enable them to provide their supply and cannot be consideration for a supply of goods to the customer given there is no such supply.

Consequently, when a member is reimbursed this cost it becomes part of the consideration they receive for their supply. It does not matter for GST purposes that this expense is separately itemised on the invoice or is the exact amount the member pays for the food.

Given this, GST is payable on the full amount received for the member's supply which includes the reimbursement.

Note that as with all transactions, a supplier charges a price that includes GST regardless of whether they take into account any GST payable by them or not.

Input taxed credits (GST credits)

A member is entitled to claim any GST that was payable when they purchased the goods.