Edited version of your private ruling

Authorisation Number: 1012435936620

Ruling

Subject: GST and counter fee

Question 1

What is the goods and services tax (GST) treatment of the additional fee where the fee applies to a transaction that consists of taxable and non-taxable components?

Answer

The fee must be apportioned (on a reasonable basis) between the taxable and non-taxable components, and takes on the character of the underlying supply. Please refer to our reasons for decision.

Relevant facts and circumstances

· You are a State department and are registered for GST.

· You have announced that a over-counter fee will apply to all transactions where the transaction can be done online or by phone rather than by front counter service.

· Fees and charges prescribed by a State Act are listed in relevant regulations (Regulations).

· The fee will be listed in the Government Gazette and not included in the Regulations. Some of the transactions under the State Act are excluded from GST under Division 81 of the GST Act. Other transactions include fees and charges that are not excluded from the GST.

· The purpose of the fee is to reduce the congestion at government office by encouraging customers to process transactions via the internet/phone when an internet/phone service is available.

· The fee will apply in addition to any other fee included in the transaction.

· The fee will not apply where a visit to the government office is required.

· A private binding ruling has been issued to you earlier advising that that the counter fee will be excluded from GST where the payment for the underlying supply is excluded from GST.

· You have noticed that a transaction at the counter that attracts the counter fee may include components that are subject to GST and components are not subject to GST.

According to the Department's website:

· Each component of the transaction is itemised, with a separate charge per item identified.

· A component of the transaction is added to the transaction at time of payment rather than when the service under that component is conducted

· A component is included in the transaction, although it is administered by another entity.

You do not require advice on the GST status of those charges, only on the GST treatment of the counter fee on a transaction at a counter when it relates to those components.

You have also advised that you do not require a detailed discussion on how to apportion the counter fee to different components of the notice.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Section 9-5

Section

Division 81

Reasons for decision

You have provided an example of a transaction that made at a counter may include the following charges for different components that some are subject to HGST and some are not

A single payment is made for the above components together under the same notice.

The counter fee is paid per transaction at the counter and is a fixed amount. Hence, we need to consider whether the counter fee relates to the transaction as a whole or to each component of the transaction.

Mixed or composite supply

Goods and services tax ruling GSTR 2001/8 explains how you can identify whether a supply includes taxable and non-taxable parts under the GST Act.

Paragraphs 19 and 20 of GSTR 2001/8 provide that:

19. Where a transaction comprises a bundle of features and acts, you must consider all of the circumstances of the transaction to ascertain its essential character. You also need to consider the effect the GST Act has on the supply or any of its individual parts. You can then determine whether the transaction is a mixed supply because it has separately identifiable parts that the GST Act treats is taxable and non-taxable, or whether it is a composite supply because one part of the supply should be regarded as being the dominant part, with the other parts being integral, ancillary or incidental to that dominant part.

20. The distinction between parts that are separately identifiable and things that are integral, ancillary or incidental, is a question of fact and degree. In deciding whether a supply consists of more than one part we take the view that you adopt a commonsense approach.

To assist with the consideration of whether a supply is a mixed or composite supply, paragraphs 43 and 44 of GSTR 2001/8 provide that:

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.

Separately identifiable parts

Paragraph 52 of GSTR 2001/8 provides the view of the Commissioner that:

… a supply has separately identifiable parts where the parts require individual recognition and retention as separate parts, due to their relative significance in the supply. This view applies where the supply is comprised of a mix of separate things, such as various combinations of goods and services, including the provision of advice.

In your circumstances we consider the following relevant factors:

· Each item is separately listed in the notice along with the separate charge for each item, even though a single payment must be made covering all components.

· A customer cannot make a part payment or only pay certain component(s) listed in the notice. The combined amount in the notice must be paid in full. However, we consider that this does not alter the fact that the payment for the notice (as a whole) is payment for the different components listed in the notice.

· We noted that two components listed in the notice are independent parts of the notice. A component of the transaction is added to the transaction at time of payment rather than when the service under that component is conducted. Another component is included in the transaction, although it is administered by another entity.

· The inclusion of the two components above in the notice is to facilitate a more efficient method of collection.

Therefore, the payment for a notice is a payment for separate, identifiable components included in the notice. It is not a supply of one dominant part with the other parts being only ancillary or incidental to that dominant part. In other words, the payment for a notice is payment for a mixed supply.

Although your request relates to the example of a notice, the following guidance is relevant for other transactions that contain both taxable (subject to GST) and not taxable (not subject to GST) components.

GSTR 2001/8 provides the following steps to work out whether a supply is mixed or composite supply:

· Whether the supply (transaction) contains (or appears to contain) more than one part.

· If that is the case, you must consider all of the circumstances of the transaction to ascertain its essential character. You also need to consider the effect the GST Act has on the supply or any of its individual parts.

· You can then determine whether the supply is a mixed supply because it contains separately identifiable parts that the GST Act treats as taxable and non- taxable parts or is a composite supply because one part of the supply should be regarded as being the dominant parts.

· Separately identifiable parts indicating a mixed supply are discussed in paragraphs 45 to 54C

· Integral, ancillary or incidental parts indicating a composite supply are (discussed in paragraphs 55 to 63).

Apportioning payments for a mixed supply

The counter fee is paid for a transaction consisting of more than one item. It is considered that the payment of the counter fee constitutes consideration for the underlying transaction (a mixed supply of a number of item(s) subject to GST and item(s) not subject to GST).

It should be noted that, although the counter fee constitutes consideration for the underlying transaction that contains different components, the counter fee does not necessarily have to be apportioned on the same basis as the known consideration of each component. A reasonable apportionment method (discussed in GSTR 2001/8 and below) that is the most appropriate in the circumstances may be used.

You have advised that you do not require a detailed discussion on how to apportion the counter fee to different components of the notice. Therefore some general guidance, based on GSTR 2001/8, is provided as follows:

The method (direct or indirect) that you use must be reasonable, based on all the circumstances, supportable by the facts in the particular circumstances (paragraph 92).

You need to keep records that explain the method used for the transaction (paragraph 95).