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Edited version of private advice
Authorisation Number: 1012623064642
Ruling
Subject: GST and input tax credits
Question
Are you entitled to claim input tax credits for the supply of services made to you by the non-resident entity for which you pay them a commission?
Answer
No, you are not entitled to claim input tax credits for the supply of services made to you by the non-resident entity for which you pay them a commission because your acquisition is not a creditable acquisition under section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You provide transport services in Australia.
You entered into an agreement with the non-resident entity under which the non-resident entity provides an on-demand, intermediary service (the service) through the app that allows a customer to request transport service from an available driver who will render the transport service on your behalf.
Under the agreement, the non-resident also grants you a limited, non-exclusive, royalty free, non-transferable and non-assignable right to use the app and the device on which the app runs.
You pay the non-resident entity a commission for the service provided by it under the agreement. The amount of commission is paid per ride and is calculated at a specified percentage.
The non-resident entity collects the fare and issues receipts on your behalf. The non-resident entity sends you payment statements that show the fares collected, the non-resident entity's commission and the payout made to you. The non-resident entity also sends you an invoice for the commission.
You sent us copies of the payment statements and an invoice from the non-resident entity. Neither the payment statements nor the invoice show that the commission payable includes GST.
You advised that the non-resident entity is not required to be registered for GST in Australia.
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 11-5 and
A New Tax System (Goods and Services Tax) Act 1999 section 11-15.
Reasons for decision
You are entitled to input tax credits for your creditable acquisitions.
Section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states:
You make a creditable acquisition if:
(a) you acquire anything solely or partly for a *creditable purpose; and
(b) the supply of the thing to you is a *taxable supply; and
(c) you provide, or are liable to provide, *consideration for the supply; and
(d) you are *registered, or *required to be registered.
(* denotes a term defined under section 195-1 of the GST Act).
All the conditions above must be satisfied for your acquisition to be a creditable acquisition.
Under the agreement, the non-resident entity grants you a right to use the app and the device on which it runs. However, you pay the non-resident entity commission for the intermediary service which, based on the agreement, involves providing your availability to passengers, collecting fares and issuing receipts on your behalf. For the purpose of paragraph 11-5(a) of the GST Act, you acquire the intermediary service of the non-resident entity rather than the right to use the app which is granted to you royalty-free.
You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. However, you do not acquire a thing for a creditable purpose to the extent that:
• the acquisition relates to making input taxed supplies; or
• the acquisition is of a private or domestic nature.
You acquire the services of the non-resident entity in carrying on your enterprise of providing transport services. Your supply of providing transport services is not an input taxed supply. Furthermore, your acquisition is not of a private or domestic nature. Therefore, you acquire the services of the non-resident entity for a creditable purpose. Paragraph 11-5(a) of the GST Act is satisfied.
You provide consideration for the supply of services of the non-resident entity in the form of commission. You are registered for GST. Paragraphs 11-5(c) and 11-5(d) of the GST Act are also satisfied.
Paragraph 11-5(b) of the GST Act requires that the thing that you acquire is a taxable supply to you.
One of the requirements for a supply to be a taxable supply under section 9-5 of the GST Act is that the supplier is registered or required to be registered for GST. Based on information received, this requirement is not satisfied as the invoice issued by the non-resident showed that there is no GST on the supply; and you advised that the non-resident is not required to be registered
As one of the requirements in section 9-5 of the GST Act is not satisfied, the supply of services made by the non-resident is not a taxable supply. Accordingly, paragraph 11-5(b) is not satisfied.
As not all of the requirements in section 11-5 of the GST Act are satisfied, your acquisition of the services from the non-resident is not a creditable acquisition. Therefore, you are not entitled to claim input tax credits on the supply of services for which you pay the non-resident a commission.