Edited version of your written advice

Authorisation Number: 1012894921930

Date of advice: 14 October 2015

Ruling

Subject: GST and services supplied to entities

Question 1

When you invoice entities, for goods and services you contract for and pay on their behalf, do you need to charge goods and services tax (GST) on the amounts provided by the entities for the supplies?

Answer

No.

Question 2

When you invoice the entities a service fee for your supply, do you need to charge GST?

Answer

Yes.

Relevant fact

You are an Australian company and registered for GST.

You carry on your business activity as follows:

1. You enter into an agreement with a client. Under the Agreement you assist the client by finding overseas suppliers from whom the client can purchase specific goods and organise for the importation of the purchased goods into Australia on behalf of the client.

2. After locating an overseas supplier for the client and with the approval of the client, you place an order for the goods under the name of the client with the overseas supplier.

3. You invoice the client for the ordered goods and a service fee.

4. The client makes the payment to your bank account and you transfer the money for the ordered goods to the supplier's bank account and keep the service fee.

5. The bill of lading for the goods is under the name of the client.

6. You engage a custom broker to clear the ordered goods on behalf of the client from the Australian Customs. The goods are entered into Australia under the name of the client.

7. The custom broker invoices you for their services and you invoice the client the amount invoiced by the custom broker.

The service fee is for services made to the client under the Agreement. You do not on your behalf buy, import and sell goods to the client.

You have provided us with a copy of the tax invoice that the custom broker issues to you. The tax invoice is addressed to you and provides information about the supplier and importer of the goods, what goods have been imported in Australia and detail of services performed for the clearing of the goods from Customs.

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 195-1

Reasons for decisions

Questions 1 and 2

You assist the Buyer by finding a supplier for goods they want to purchase and at the request of the Buyer, you place an order of goods for the Buyer with the supplier and organise for the importation of the goods in Australia on behalf of the Buyer. You invoice the Buyer for the cost of the ordered goods, a service fee for providing your services and the fees charged by the custom broker in regard to the importation of the goods into Australia. The payment related to the ordered goods is transferred to the supplier's bank account.

You asked whether you should charge GST when invoicing the Buyer for these payments. In this instance, we must first determine whether you are making a supply to the Buyer on receipt of these payments before considering whether GST is applicable.

Are you making a supply for these payments?

Under subsection 9-10(1) of the GST Act a supply is any form of supply whatsoever and may include services, goods and other things.

Paragraphs 48 and 49 in Goods and Services Tax Ruling GSTR 2000/37 provide guidance on agency relationship and disbursements and state:

48. Agents may incur expenses on a client matter both as an agent of the client and as a principal in the ordinary course of providing their services to the client. For example, in most cases, even though agreements between solicitors and clients may not use the term agent or agency, it is clear that the clients have authorised the solicitors to act on their behalf in the particular matter. When the solicitor acts as an agent for the client, the general law of agency applies so that the solicitor is 'standing in the shoes' of the client.

49. If a disbursement is made by a solicitor and incurred in the solicitor's capacity as a paying agent for a particular client, then no GST is payable by the solicitor on the subsequent reimbursement by the client. This is because the goods or services to which the disbursement relates are supplied to the client, not to the solicitor, by a third party. Also, the reimbursement forms no part of the consideration payable by the client for the supply of services by the solicitor. However, if goods or services are supplied to the solicitor to enable the solicitor to perform services supplied to the client, GST is payable by the solicitor on any reimbursement by the client of expenses incurred on those goods or services, whether the reimbursement is separately itemised or included as part of the solicitor's overall fee. This is because the reimbursement is part of the consideration payable by the client for services supplied by the solicitor.

Payments for ordered goods and custom broker's services

In this situation, as the Buyer's Assistant, you have express authority to enter into contracts on behalf of the Buyer in that you entered into contracts for goods and services. It is recognised you are not a general agent; however, you do have specific authority to do certain things and are an agent to the limit of that authority.

Therefore, in regard to the expenses for ordering goods and services of a custom broker, we consider you are acting in the capacity of a paying agent for the Buyer when you contract for these supplies and pay these expenses. This is because they relate to supplies made by third parties to the Buyer and not to you as they are acquired for the purposes of the Buyer's enterprise.

Accordingly, where you contract for the supply of goods and services on behalf of the Buyer and you receive an amount of money from the Buyer, for the goods and services, it will be for the purpose of transferring the money for you to pay for the Buyer's supplies. As such it will be out of scope for GST as you do not make a supply for which you receive the amount. You are essentially a conduit. You do not add any GST when you invoice the Buyer for amounts you pay on behalf of the Buyer.

Service fee

The service fee you received from the Buyer is as a result of the services you make to the Buyer under the Agreement in your own right. In this instance, you have made a supply for consideration under the Agreement as the service fee is for your supply of services made to the Buyer. Where the other requirements of section 9-5 of the GST Act are satisfied you make a taxable supply of which GST is payable.

Under section 9-5 of the GST, an entity makes a taxable supply if:

• the supply is made for consideration;

• the supply is made in the course or furtherance of an enterprise that the entity carries on; and

• the supply is connected with the indirect tax zone (Australia); and

• the entity is registered for GST; and

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

When you supply your services to the Buyer under the Agreement, you satisfy all the requirements in section 9-5 of the GST Act. Therefore, your supply of services to the Buyer is a taxable supply and you are liable to pay GST on the supply. Your tax invoice to the Buyer will state the amount of GST payable for the supply.

The fact sheet 'How to set out tax invoices and invoices' which is available at www.ato.gov may be of assistance to you as it provides examples of formatted tax invoices.