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Ruling
Subject: GST and solar electricity credits
Question
Did the electricity company overcharge you an amount of goods and services tax (GST) on your tax invoices for electricity?
Decision
No, the electricity company did not overcharge you an amount of GST on your tax invoices for electricity.
Relevant facts and circumstances
• As per our system, you are registered for GST.
• Presently, you provide professional services on a part time basis.
• You acquire electricity for domestic consumption through an electricity company. As it is purely for domestic use, you do not claim any input tax credits on your acquisition of electricity.
• Your residence is equipped with solar panels, which are connected to the electricity grid. You receive credits for the electricity supplied by you to the grid.
• As an example, on the electricity tax invoice for a past supply period, the GST exclusive value of electricity and service charges provided by the supplier amounted to $xxx.xx. GST payable on it was $xx.xx.
• For the same period, you received a GST exclusive credit of $xxx.xx for the solar electricity supplied from your solar panels to the grid.
• You consider that as the system operates, the Tax Office is not in a position to know the amount of GST paid in this circumstance and is likely to only expect payment of 10% of the amount paid by you and declared by the electricity supplier.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 (GST Act) - section 9-5
A New Tax System (Goods and Services Tax) Act 1999 (GST Act) - section 11-5
Reasons for the decision
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that you make a taxable supply if:
(a) you make the supply for *consideration; and
(b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and
(c) the supply is *connected with Australia; and
(d) you are *registered or *required to be registered.
However, the supply is not a *taxable supply to the extent that it is *GST free or *input taxed.
*Denotes a term defined in section 195-1 of the GST Act.
Section 11-5 of the GST Act states that:
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.
It should be pointed out that in this case there were two supplies made. The first supply was a supply of electricity made by you to the electricity company through your connection to the electricity grid. Your supply was not made as part of an enterprise carried on by you. Therefore, this supply did not satisfy paragraph 9-5(b) of the GST Act. Therefore, there was not a taxable supply of solar electricity from you to the electricity company.
The second supply was a supply of electricity made to you by the electricity company for consideration and in the course of their enterprise. The supply was connected with Australia and the electricity company is registered for GST. The supply of electricity is not a GST-free or an input taxed supply under any provision of the GST Act. Therefore, when the electricity company supplies electricity for your domestic consumption, they make a taxable supply and they have an obligation to remit the relevant GST amount to the Tax Office.
Please note that each supply has to be considered separately and any GST payable has to be calculated separately. Similarly each acquisition has to be considered separately and the input tax credit claimable has to be calculated separately.
In your case, for the above mentioned supply period, they supplied you electricity with a GST exclusive value of $xxx.xx. As it was a taxable supply to you, they had an obligation to remit 10% of the value of the supply ie. $xx.xx to the Tax Office. They charged this amount to you to be remitted to the Office.
Therefore, the total amount payable by you to the electricity company for their supply of electricity for the relevant period was correctly calculated by the electricity company.