Edited version of private advice

Authorisation Number: 1051599323675

NOTICE

This private ruling was revised following an issue. This edited version has therefore been replaced with the edited version of the private ruling with the authorisation number of 1051811550305.

Date of advice: 20 December 2019

Ruling

Subject: GST and the supply of mobile handsets under a bundle plan.

Question

Are the taxable supplies of handsets under a bundle plan made by you, supplies to which paragraph 29-25(2)(e) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and PAR 2017/8 apply to vary the attribution of the GST to each monthly tax period in which you issue invoices for part consideration for the supply of the handsets?

Answer

Yes, the supplies of handsets under a bundled plan are supplies to which 29-25(2)(e) of the GST Act and PAR 2017/8 apply given the total consideration depends on future events not within your control.

Given the contract outlining the bundled plan is not an invoice then under PAR 2017/8, the GST on the taxable supply of the handset is attributable to the extent of the amount invoiced each month or the amount of the consideration received each month if the consideration received is more than the amount invoiced.

Relevant facts and circumstances

You carry on a business as a provider of a mobile telecommunications network services and are a seller of handsets, which is ancillary to your underlying business of connecting customers to your mobile telecommunications network.

Mobile equipment payment plans (bundled plan)

You offer mobile equipment to customers on bundled plan, allowing them to pay for the cost of the handset over a set period. Customers are given a handset credit for each month they are connected to the eligible mobile service plan. In a typical bundled plan contract the monthly handset credit is equal to or less than the monthly handset instalment and the customers are required to pay the net amount, providing they remain connected to the service plan.

You presented a signed contract (Contract) and explained how the consideration of the handset varies when customers exercised their right under the Contract to vary the terms of the Contract. The Contract indicates the minimum discount price of the handset when the Customer remains connected to the data plan on the Contract until expiry of the terms.

The consideration for the handset can change when customers exercise their rights to vary the Contract.

After the Contract is signed the handset is supplied and the amounts shown above are billed monthly.

Under the above plan, consideration for the handset is received in monthly instalments - subject to any Contract variations by the consumer.

No consideration is received on the issuing of the Contract.

You account for GST on a non-cash basis.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 29-5(1)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 29-25(1)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 29-25(2)(e)

A New Tax System (Goods and Services Tax) Act 1999 Division 195-1

Reasons for decision

Summary

The supplies of handsets under the bundled plan are supplies to which paragraph 29-25(2)(e) of the GST Act and PAR 2017/8 apply given the total consideration depends on future events not within your control.

Given the contract outlining the bundled plan is not an invoice, then under PAR 2017/8 the GST on the taxable supply of the handset is attributable to the extent of the amount invoiced each month or the amount of the consideration received each month if the consideration received is more than the amount invoiced.

Detailed reasoning

Basic attribution rules

In accordance with subsection 29-5(1), an entity that accounts for GST on a non-cash basis must attribute the GST payable on a taxable supply that it makes:

(a)  to the tax period in which any of the consideration is received for the supply; or

(b)  if, before any of the consideration is received, an invoice is issued relating to the supply - the tax period in which the invoice is issued. (emphasis added)

Under the basic attribution rules, you would have to attribute the total GST payable on the taxable supply of the mobile handset to the tax period in which either the first instalment under the Payment Plan is received by you, or an invoice is issued, whichever is earlier.

Determination of particular attribution rules

Under subsection 29-25(1) of the GST Act the Commissioner may determine particular attribution rules in the circumstances described in subsection 29-25(2) of the GST Act.

These rules override the basic attribution rules in subsection 29-5(1) of the GST Act.

PAR 2017/8 provides attribution rules for supplies as described in paragraph 29-25(2)(e) of the GST Act which occur before the supplier knows the total consideration. PAR 2017/8 will apply to change your attribution of GST payable, where during the tax period in which the taxable supply of bundled handsets are supplied the supplies are those described in paragraph 29-25(2)(e) of the GST Act.

PAR 2017/8 at Clause 5 attributes the GST on the taxable supply to the extent of the amount invoiced each month or the amount of the consideration received each month if the consideration received is more than the amount invoiced.

Where no invoice is issued the GST payable on the taxable supply is the amount of the consideration received in that tax period (if any).

Application to your facts:

As outlined in the Contract, the total amount payable for the handset is paid in monthly installments over a period.

The ascertainment of this total consideration depends on future events that are not entirely within your control as under the Contract the customer has the right to vary the Contract, which will vary the consideration for the handset.

Therefore in the tax period the handset is supplied, you cannot ascertain the total consideration of the handset due to customers' right to vary the Contract, which results in the variation of the consideration of the handset. You have no control over whether customers choose to exercise their rights under the Contract to vary the Contract terms.

Hence the supplies of handsets under a bundled plan are supplies to which paragraph 29-25(2)(e) of the GST Act and PAR 2017/8 applies.

Is the Contract an invoice?

The period in which the GST is attributable will depend on which period an invoice is first issued.

After the Contract is signed the handset is supplied and the amounts shown above are billed monthly.

Therefore we need to decide whether the Contract between the customers and you amounts to an invoice as defined in section 195-1.

Section 195-1 of the GST Act defines 'invoice' as 'a document notifying an obligation to make a payment'.

To determine if the contract is an invoice will depend on the terms of the contract and the intention of the parties. This characteristic exists where the document informs the parties that there is a presently existing obligation to make a payment and the amount of that payment (paragraph 12 of Goods and Services Tax Ruling (GSTR) 2000/34).

We consider that the Contract is not an invoice because it does not notify an existing obligation to make a payment at the time of the signed contract. You only require payment of the monthly instalment amounts, which occur in the tax period after the issuing of the contract.

Given the contract outlining the bundled plan is not an invoice, then under PAR 2017/8, the GST on the taxable supply of the handset is attributable to the extent of the amount invoiced each month or the amount of the consideration received each month if the consideration received is more than the amount invoiced.