Edited version of your private ruling

Authorisation Number: 1012520551593

Ruling

Subject: GST and supply of water

Question

Is the water component itemised in your tax invoice GST-free under Division 38-I of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

In your circumstances, you use, amongst other things, water in making a supply of services to the recipient. The fact that a supply of water to you is GST-free does not determine the GST treatment of the supply of services you make to the recipient. This is because you do not make a separate supply of water to the recipient.

Relevant facts and circumstances

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

· You operate a water truck to water down roads.

· You have entered into arrangements (verbal) with a number of clients to wet specific areas by providing a water truck, water and a driver to water down the areas as agreed.

· Your understanding of the arrangement is that:

- you are providing a service of water down the areas, where water is used in the provision of the service,

- your supply is not providing a water truck to cart water for human consumption,

- you are required to purchase water in your own right and are liable to pay for the water. You do not acquire the water on behalf of the recipients of the services and receive reimbursement from them.

· Under the arrangement with another entity (B), you are required to list the amount of water used for each job. B pays you the hours worked and the water actually used.

· Your tax invoice to B shows the following:

- Job description

- Hours worked by a water truck (labour) and price per hour

- Number of loads of water used for each job (at GST-free cost)

- Total and GST of 10% of the total (that is labour and water both attract GST).

· Payments from B include GST on labour but GST on water has not been paid.

Relevant legislative provisions

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

Section 9-5

Section 38-285

Reasons for decision

Under subsection 7-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) GST is payable on any taxable supply that you make. Section 9-5 provides that you make a taxable supply when:

(a) you make a supply for consideration;

(b) the supply is made in the course or furtherance of an enterprise that you carry on;

(c) the supply is connected with Australia; and

(d) you are registered, or required to be registered for GST.

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

A supply is GST-free if it is GST-free under Division 38 of the GST Act or under a provision of another Act.

We need to ascertain what the supply in your circumstances is.

Subsection 38-285(1) of the GST Act provides that a supply of water is GST-free. This does not include water that has been supplied in, or transferred into, a container with a capacity of less than 100 litres.

Goods and Services Tax Ruling GSTR 2000/25 provides the ATO view relating to GST-free supplies of water. Paragraph 20 of GSTR 2000/25 states that a supply of water under section 38-285, '...refers to the delivery or the making available of water, as goods, to a recipient's premises.' Furthermore, paragraph 21 provides that the supply of water, '...means the change in ownership or control and transfer of physical possession of water from a supplier to a recipient.'

Under the agreement between you (the supplier) and the recipient of your supply you undertake to provide the water truck, water and a driver to wet specific areas in return for payments.

You have advised that you are not engaged to cart water to the recipients for human consumption. At all time prior to water down specific areas, there is no change in the ownership or control and transfer of physical possession of water from you to the recipient of your supply.

Therefore, your supply is not a supply of water, as goods, under section 38-325 of the GST Act. We consider that the water you use to wet specific areas is one of many things you have acquired in making a supply of the water down service under the service agreement.

Where a supplier incurs costs to acquire things, such as water, in making a supply to a recipient, these costs may be inclusive of or exempt from GST. In determining the price of the supply, the supplier includes, amongst other things, these costs by on-charging them to the recipient.

In your circumstances, you use, amongst other things, water in making a supply of services to the recipient. The fact that a supply of water to you is GST-free does not determine the GST treatment of the supply of services you make to the recipient. This is because you do not make a separate supply of water as goods to the recipient.

Is the supply of your services taxable?

The supply of your services by providing a water truck, water and a driver to water specific areas meets all the requirements of section 9-5 of the GST Act.

· the supply is made for monetary consideration

· the supply is made in course or furtherance of your enterprise

· the supply is made in Australia

· you are registered for GST

· the supply is not GST-free or input taxed under the GST Act or any other Acts.

Therefore, your supply is a taxable supply. You are required to remit to the Tax Office the GST embedded in the total price you charge to the recipient. That is, GST is payable by you on the total price.