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Edited version of your private ruling
Authorisation Number: 1012540427209
Ruling
Subject: GST and solar power credits
Question 1
Is goods and services tax (GST) applicable when you receive solar power credits for electricity that you supply to an electricity retailer?
Answer
Yes.
Relevant facts and circumstances
You are registered for GST.
You are endorsed as a charity for GST purposes.
Your main charitable purpose is the advancement of social and community welfare.
You have installed a solar power electricity generation system (solar panels) on the roof of your establishment of which you carry on your enterprise.
The total price was inclusive of GST.
You have claimed an input tax credit for the GST component.
Your solar power electricity generation system is connected to an Australian electricity grid.
You supply the electricity generated from the solar panels to an electricity company, by feeding the electricity into the electricity grid. In return for these supplies, you are entitled to solar scheme credits, which are offset against the bill for the electricity that the electricity retailer sells to you.
The solar scheme credits you received for supplying electricity back into the grid are more than the electricity you used and the electricity retailer pays these excess credits to you.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5
A New Tax System (Goods and Services Tax) Act 1999 Section 9-20
A New Tax System (Goods and Services Tax) Act 1999 Paragraph 9-20(1)(d)
Reasons for decision
GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if:
(a) you make the 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.
From the facts received, you satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act as explained below:
(a) Supply made for consideration
You are a solar owner and you supply solar generated electricity to an electricity retailer. Therefore, you are making a supply for GST purposes. Your supply of electricity back into the grid is for consideration and the requirement of paragraph 9-5(a) of the GST Act is satisfied.
(b) Supply made in course or furtherance of enterprise
In accordance with paragraph 9-20(1)(d) of the GST Act, an activity or series of activities done by a charity is an enterprise.
The supply of electricity back into the grid is produced by the solar panels that you have installed on the roof of your establishment from which part of your charitable activities and enterprise is undertaken. Accordingly, the supply of the electricity back into the grid is made in the course or furtherance of an enterprise that you carry on. Furthermore, you have confirmed that you have claimed the GST credit on the cost of the acquisition and installation of the solar panels in the course of your enterprise. The requirement of paragraph 9-5(b) of the GST Act is satisfied.
(c) Supply connected with Australia
Your supplies of electricity to the electricity retailer are connected with Australia as the supply is made from an enterprise that you carry on in Australia. Therefore, the requirement of paragraph
9-5(c) of the GST Act is satisfied.
(d) GST registration
You are registered for GST purposes. Therefore, the requirement of paragraph 9-5(d) of the GST Act is satisfied.
However, your supply of electricity back into the grid is not a taxable supply to the extent that it is GST-free or input taxed.
There is no provision under the GST Act that makes your supply of electricity back into the grid GST-free or input taxed. Accordingly, your supply of electricity back into the grid is a taxable supply under section 9-5 of the GST Act and you will be liable to pay GST on this supply.
Where an electricity retailer makes a taxable supply of electricity to a solar owner, the electricity retailer must calculate the GST on the full value of the electricity they supply to the solar owner. The value of electricity supplied by the electricity retailer to the solar owner is not offset or reduced by any electricity that may be supplied by the solar owner to the electricity retailer. The supply of electricity by the electricity retailer to the solar owner is separate from the supply by the solar owner to the electricity retailer.
Further information can be located on the Electricity and Gas Industry Partnership document that can be located on the Australian Tax Office website. A copy of this document has been included for your information.