Edited version of your written advice

Authorisation Number: 1012755980591

Ruling

Subject: GST

Question 1

Does Entity A make a taxable supply or a taxable importation when it provides the thing to the Customer?

Answer

No.

Question 2

Does Entity A make a taxable supply under Division 84 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) in the above transaction?

Answer

No.

Question 3

Does Entity A make any other taxable supply in the above transaction?

Answer

Entity A makes a taxable supply of agency services to the Customer and does not make any other taxable supply in the above transaction.

The scheme commences on:

The scheme has commenced

Relevant facts and circumstances

• Entity A is registered for goods and services tax (GST) and operates a website.

• A Customer can buy the specified thing through that website.

• In this ruling, the Customer is an Australian resident for tax purposes and is present in Australia at the time of the transaction.

• When the Customer places an order on the website, the Customer is required to enter into an agreement with Entity A and accepts the terms of that agreement.

• The agreement provides that:

• Entity A provides buyer's agency services (Services) for the Customer.

• The Customer appoints Entity A as its agent for the sole purpose of acquiring the thing under the order.

• The Customer directs and authorises Entity A to acquire the thing on their behalf and at the agreed price set out in the order form on the website.

• Entity A does not act as agent for any supplier of the thing.

• Entity A charges the Customer a fee (Commission) for its Services.

• Entity A must provide the Customer with a tax invoice which specifies the amount of the thing acquired, the amount of the Commission, GST charged on the Commission, and the total amount paid by the Customer.

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 13-5,

A New Tax System (Goods and Services Tax) Act 1999 section 84-5 and

A New Tax System (Goods and Services Tax) Act 1999 section 84-10.

Reasons for decision

1. Does Entity A make a taxable supply or a taxable importation when it provides the thing to the Customer?

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

• you make the supply for consideration;

• the supply is made in the course of furtherance of an enterprise that you carry on;

• the supply is connected with Australia;

• you are registered or required to be registered for GST; and

• the supply is neither GST-free nor input taxed.

Under the GST legislation, a supply is a supply of any form of supply whatsoever. Therefore, a supply of the thing to the Customer would constitute a supply.

A supply made by 'you' is a taxable supply where the requirements of section 9-5 of the GST Act are met. The expression 'you' in the GST Act applies to an entity generally. Therefore, it is necessary to identify who is actually making the supply.

Entity A has submitted that it is acting as agent for the Customer in the transaction.

Whether an agency relationship exists will depend upon the arrangements between the parties and the conduct of the parties.

Goods and Services Tax Ruling GSTR 2000/37 discusses the general law in relation to agency relationships. GSTR 2000/37 at paragraph 28 provides for consideration a list of factors which may indicate an agency relationship.

Agency relationships

Factors that indicate an agency relationship

28. In most cases, any relevant documentation about the business relationship, the description used by the parties and the conduct of the parties establish the existence of an agency relationship. Therefore, the following factors may show that you are an agent under an agency relationship, although no single factor (by itself) is determinative:

• any description of you as an agent, having authority to act for another party, in an agreement (expressed or implied) between you and the other party;

• any exercise of the authority that you are given to enter into legal relations with a third party;

• whether you bear any significant commercial risk;

• whether you act in your own name;

• whether you are remunerated for your services by way of commissions and whether you are entitled to keep any part of your remuneration secret from another party; and

• whether you decide the price of things that you might sell to third parties.

Based on the above factors, we consider that the terms of the agreement between Entity A and the Customer, the substance of the dealings between the relevant parties and the total factual circumstances surrounding the transaction, indicate that an agency relationship exists between Entity A and the Customer, for the acquisition of the thing.

The principal is bound by the acts of an agent as a result of the authority given to the agent.

When an agent uses their authority to act for a principal, then any act done on behalf of that principal is an act of the principal.

When Entity A acquires the thing from another entity (Entity B), this act is considered to be an act performed by the Customer. As a result, it is the Customer, and not Entity A that is making the acquisition of the thing from Entity B.

Also, as Entity A does not acquire the thing, Entity A cannot be viewed as having acquired the thing to on supply the thing, in its own right, to the Customer in that transaction. As such, the supplier of the thing is Entity B and not Entity A.

As a result, Entity A does not make a taxable supply of the thing when it provides the thing to the Customer.

Under section 13-5 of the GST Act, an entity makes a taxable importation if goods are imported and the entity enters the goods for home consumption. As discussed above, Entity A is acting as agent for the Customer when Entity A acquires the thing from Entity B. Therefore, it is the Customer, and not Entity A that would be making any importation. As a result, Entity A does not make a taxable importation in the transaction.

2. Does Entity A make a taxable supply under Division 84 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) in the above transaction?

Under section 84-5 of the GST Act, a supply of anything other than goods or real property that is a supply not connected with Australia, is a taxable supply if:

• the recipient of the supply acquires the thing supplied solely or partly for the purpose of an enterprise that the recipient carries on in Australia, but not solely for a creditable purpose;

• the supply is for consideration;

• the recipient is registered, or required to be registered; and

• the supply is neither GST-free nor input taxed.

Subsection 84-10(1) of the GST Act provides that where a supply is a taxable supply under section 84-5 of the GST Act, the GST amount payable on that supply is payable by the recipient of the supply.

Entity A acquires the thing as agent, on behalf of the Customer and is not the recipient of the supply. As such, section 84-5 of the GST Act does not apply. Entity A does not make a taxable supply under section 84-5 of the GST Act.

3. Does Entity A make any other taxable supply in the above transaction?

From the facts available, Entity A does not make any other supplies apart from providing buyer's agency services to the Customer in acquiring the thing as agent for the Customer. Entity A facilitates the acquisition in return for an agreed amount as a commission or similar payment for agency services. The supply of the agency services is a taxable supply as it meets all the requirements for a taxable supply under section 9-5 of the GST Act.