Edited version of private advice

Authorisation Number: 1051660566604

Date of advice: 22 April 2020

Ruling

Subject: Goods and services tax (GST) and rental of equipment for use in events held in Australia

Question

Referring to the invoice and quotation you provided to us, is GST payable on the supplies for which you have invoiced the overseas company (X)?

Answer

Yes. You have made supplies of rented goods relating to the invoice and quotation order you provided to the Australian Taxation Office (ATO). The services and the thing you supplied in return for the damage waiver fee relating to the rented goods are integral, ancillary or incidental to the supply of the rented goods as they contribute to the supply of the rented goods as a whole and to the proper performance of the contract which is a contract for the supply of rented goods for use at two venues in Australia. Therefore, you are making a single composite supply of rented goods.

The supply of the rented goods is a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Relevant facts and circumstances

You are registered for GST.

You build booths or stands for trade shows in Australia. You supply the structures and sometimes the banners and furniture used by the clients to man the booth. The client engages you, attends the conference (trade show or exhibition). The client later leaves and you dismantle the show.

One of your overseas clients is X, a company located in an overseas country.

You have provided us with a copy of a tax invoice and a quotation order you have issued to X for supplies you made to X and delivered at two venues in Australia.

Tax invoice

Your tax invoice dated (date) contains the following details:

Furniture

Stool Package (rental); (price)

Audio Visual

TV (rental) (price)

Logistics

Damage waiver (rental items only) (service); price: (price)

Delivery and installation (service); price: (price)

Logistics total price: (price)

Total price

Total price for invoice (price) (including GST)

Delivery address:

(in Australia)

Quotation

Your quotation order dated (dated) reference (number) contains the following information:

Rental period (date) to (date)

Audio Visual

TV (rental) (price)

Labour and logistics

Delivery, installation and dismantle (service); (price)

Damage waiver

(Price)

Total price

(Total price) (including GST)

Delivery address

(in Australia)

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

Reasons for decision

Summary

You have made supplies of rented goods relating to the invoice and quotation order you provided to the ATO. The services and the thing you supplied in return for the waiver fee relating to the rented goods are integral, ancillary or incidental to the supply of the rented goods as they contribute to the supply of the rented goods as a whole and to the proper performance of the contract which is a contract for the supply of rented goods for use at two venues in Australia. Therefore, you are making a single composite supply of rented goods.

The supply of the rented goods in Australia is a taxable supply under section 9-5 of the GST Act.

Detailed reasoning

Characterisation of supply

From the facts given there are supplies of rented furniture and Audio Visual (goods), delivery, installation and dismantling ( services) and a damage waiver fee in relation to the rental goods that are being invoiced to X.

Before we determine the GST status of your supplies we need to determine the character of your supplies that is whether the supplies you make are mixed or composite supplies.

Goods and Services Tax Ruling GSTR 2001/8 provides guidance on the characterisation of a supply.

Paragraph 17 of Goods and Services Tax Ruling GSTR 2001/8 defines 'composite supply'. It states:

17. In this Ruling, the term 'composite supply' is used to describe a supply that contains a dominant part and includes something that is integral, ancillary or incidental to that part. You treat a composite supply as a supply of a single thing. Paragraphs 55 to 63 explain what are integral, ancillary or incidental parts.

Paragraphs 55 to 59A of GSTR 2001/8 provide guidance on determining whether items are integral, ancillary or incidental to another part, being the dominant part. They state:

Integral, ancillary or incidental parts

55. Some supplies include parts that do not need to be separately recognised for GST purposes. We refer to these parts of a supply as being integral, ancillary or incidental. In a composite supply, the dominant part of the supply has subordinate parts that complement the dominant part. If such a supply is analysed in a common sense way, it can be seen that the supply is essentially the provision of one thing. It need not be broken down, unbundled or dissected any further. For this reason, a composite supply may appear, at first, to have more than one part, but is treated as if it is the supply of one thing.

55A. The Full Federal Court in Luxottica found that while 'supply' is widely defined it 'invites a common sense, practical approach to characterisation'. Their Honours said:

While 'Supply' is defined broadly, it nevertheless invites a common sense, practical approach to characterisation. An automobile has many parts which are fitted together to make a single vehicle. Although, for instance, the motor, or indeed the tyres, might be purchased separately there can be little doubt that the sale of the completed vehicle is a single supply. Like a motor vehicle, spectacles are customarily bought as a completed article and in such circumstances are treated as such by the purchaser. The fact that either the frame or the lenses may be purchased separately is not to the point. Similarly the fact that one component, the lenses, is GST-free or that one component is subject to a discount does not alter the characterisation.

55B. In Saga Holidays Stone J focussed on the 'social and economic reality' of the supply and found that there was a single supply of accommodation and the adjuncts to that supply (including the use of the furniture and facilities within each room, cleaning and linen services, access to common areas and facilities such as pools and gymnasiums and various other hotel services such as porterage and concierge) were incidental and ancillary to the accommodation part of the supply.

55C. In Westley Nominees the Full Federal Court considered what the expenditure was calculated to effect from a practical and business point of view in characterising the supply as a single supply.

56. In Customs and Excise Commissioners v. Madgett and Anor (t/a Howden Court Hotel), the European Court of Justice described the term 'ancillary' in terms of scale and connection:

'... a service is ancillary if, first, it contributes to the proper performance of the principal service and second, it takes up a marginal proportion of the package price compared to the principal service. It does not constitute an object for customers or a service sought for its own sake, but a means of better enjoying the principal service.

57. In Customs and Excise Commissioners v. British Telecommunications plc, Lord Slynn of Hadley considered whether delivery was ancillary or incidental to a supply of cars or whether it was separately identifiable. In concluding that, as a matter of commercial reality, there was one contract for a delivered car, Lord Slynn found it necessary to consider all of the circumstances of the supply and said:

'... the fact that separate charges are identified in a contract or on an invoice does not on a consideration of all the circumstances necessarily prevent all the supplies from constituting one composite transaction nor does it prevent one supply from being ancillary to another supply which for VAT purposes is the dominant supply ... the essential features of a transaction may show that one supply is ancillary to another and that it is the latter that for VAT purposes is to be treated as the supply.'

58. You will need to consider all of the facts to determine whether the supply that you make has any parts that are integral, ancillary or incidental.

59. No single factor (by itself) will provide the sole test you use to determine whether a part of a supply is integral, ancillary or incidental to the dominant part of the supply. Having regard to all the circumstances, and taking a common sense and practical approach, indicators that a part may be integral, ancillary or incidental include where:

·        ·you would reasonably conclude that it is a means of better enjoying the dominant thing supplied, rather than constituting for customers an aim in itself; or

·        ·it represents a marginal proportion of the total value of the package compared to the dominant part; or

·        ·it is necessary or contributes to the supply as a whole, but cannot be identified as the dominant part of the supply; or

·        ·it contributes to the proper performance of the contract to supply the dominant part.

59A. The factors listed in paragraph 59 of this Ruling are not necessarily the only ones that may be taken into account in properly characterising a supply. In any given case there may be other particular circumstances that are relevant. It may also be necessary to weigh up those factors which may point to part of a supply being integral, ancillary or incidental against the relative significance of the parts in the supply and therefore consider whether the parts should be recognised as separate parts. It is a question of fact and degree whether a supply is mixed or composite.

After considering all of the facts given, we consider that the rented goods (TV and furniture) is the dominant thing supplied. The services and the thing supplied in return for the damage waiver fee in relation to the rental goods are integral, ancillary or incidental to the supplies of the rented goods since they contribute to the supply of the rented goods as a whole and to the proper performance of the contract to supply the rented goods for use at specific events in Australia.

Accordingly, you make a single supply of rented goods when invoicing X for supplies you have made and provided to it at a given venue in Australia.

We shall now determine the GST status of your supply of rented goods.

GST status of supply of rented goods

GST is payable on a taxable supply.

An entity makes a taxable supply if it meets the requirements of section 9-5 of the GST Act, which states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) you make the supply in the course or furtherance of an *enterprise that you *carry on; and

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

(d) you are *registered or *required to be registered for GST

However, the supply is not taxable to the extent that it is *GST-free or *input taxed.

(* denotes a defined term in section 195-1 of the GST Act)

In your case, you meet the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act as:

(a)   you supply goods, by way of rental, for consideration (the rental fees etc); and

(b)   you supply the rented goods in the course or furtherance of the enterprise you carry on; and

(c)   your supply of the rented goods is connected with Australia, as the rented goods are made available to X at venues in Australia; and

(d)   you are registered for GST.

However, your supply is not a taxable supply to the extent if any that it is GST-free or input taxed.

There are no provisions of the GST Act which make your supplies of rented goods that are made available and delivered to the recipient in Australia GST-free or input taxed.