Edited version of private advice

Authorisation Number: 1051765476303

Date of advice: 20 October 2020

Ruling

Subject: GST and supply of online platform and services

Question

Is GST chargeable by you solely on the service fees you charge to the Tourism Operators (suppliers) for the use of your service as an intermediary between the travellers and suppliers OR on the total cost of travel collected from the travellers under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Under the arrangement in place, there are two distinct supplies being made:

1. A supply of facilitation services made by you to the suppliers, the consideration being the percentage you add to the travel cost; and
2. A supply of travel made by the suppliers to travellers, the consideration being the travel cost determined by the suppliers.

Supply of facilitation services

Where the facilitation services are made and provided to suppliers located in Australia, the supply is a taxable supply under section 9-5 of the GST Act.

Where the facilitation services are made and provided to offshore suppliers that are not in Australia in relation to the supply at the time the supply is done, the supply is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Supply of travel

The Tourism Operators as suppliers are required to consider any GST payable by the travellers on the supply when costing the travel supply (trip) to the travellers. Therefore, the cost of the trip should be GST inclusive (where applicable) when the suppliers provide their quotes to the travellers via your platform.

Relevant facts

You are an Australian based company and registered for GST. The service you provide is the online marketplace and administrative services, including payment processing to tourism operators (suppliers).

You have an online marketplace where travellers and suppliers meet and make bookings.

You have provided a copy of the terms and conditions for the use of your online platform.

You host both local and non-resident suppliers on your marketplace. You offer the use of your marketplace to them and charge them for that use. You do not purchase or resell travel from them. You do not limit the nature of travel related activities offered by the suppliers and you do not sell travel to online purchasers. You provide a marketplace where the suppliers sell to travellers.

The suppliers are provided with the opportunity to advertise examples of their offerings to potential purchasers using a trip gallery on your website. Potential travellers are then able to select an offering or sample trip plan from the supplier based around their destination of choice or to deal directly with the supplier to develop their specific requirements from scratch.

The price to be charged to the passenger is determined by the supplier to which you add a marketplace usage fee calculated as a percentage of the dollar value of the supplier's determined price.

The suppliers are located throughout the world. Your marketplace is not tied to any location and is open to suppliers anywhere. Currently your marketplace has offerings from over 60 countries.

Australian suppliers are registered for GST. Those located outside Australia are not.

Where the suppliers are non-residents, you have no idea if they carry on any business activity in Australia through a subsidiary or agent in Australia.

Offshore suppliers are responsible for their own reporting and conformity with Australian tax regulations for their sale.

The supplier bears the commercial risk when supplying the supplies to be made to the traveller. The supplier is responsible for refunds in accordance with its booking policies for any cancellation made by the traveller.

The traveller pays the travel cost and the added percentage to you once a supply is made. You will remit the amount collected from the traveller less the percentage to the supplier together with a supplier created tax invoice where the supplier is an Australian tourism operator. GST is applied to your fee in the calculation of the amount of the remittance to the supplier where the supplier is an Australian tourism operator.

The traveller will make a complaint if they are not satisfied with the purchases they have made. You expect to receive such calls and will address them to protect the integrity and reputation of the marketplace but for no other reason. All parties - traveller, supplier and you as marketplace operator will be involved in such discussions. You will cancel a supplier's access to the marketplace if that supplier does not meet the required standards. You have provided us with a copy of your complaint handling process.

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 38-190

Reasons for decision

Note: Where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in section 195-1 of the GST Act.

Summary

Under the arrangement in place you are making a supply of facilitation services to the suppliers.

Where the facilitation services are made and provided to suppliers located in Australia, the supply is a taxable supply under section 9-5 of the GST Act.

Where the facilitation services are made and provided to offshore suppliers that are not in Australia in relation to your supply at the time the supply is done, the supply is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act.

Detailed reasoning

What is your supply?

Based on the information given, there are two distinct supplies being made under the arrangement in place:

1. A supply of facilitation services made by you to the suppliers, the consideration being the percentage you add to the travel cost; and
2. A supply of travel made by the suppliers to travellers, the consideration being the travel cost determined by the suppliers.

In this instance, you will be responsible for GST on the supply of the facilitation services you make to the supplier under the GST law.

The Tourism Operators as suppliers are required to consider any GST payable by the travellers on the supply when costing the travel supply (trip) to the travellers. Therefore, the cost of the trip should be GST inclusive (where applicable) when the suppliers provide their quotes to the travellers via your platform.

We will now consider the GST status of your supply of facilitation services.

Supply of facilitation services

Taxable supply

A supply is a taxable supply under section 9-5 of the GST Act if:

a)    the supply is for consideration; and

b)    the supply is made in the course of an enterprise carried on by the supplier; and

c)    the supply is connected with Australia; and

d)    The supplier is registered or required to be registered for GST.

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

Your supply of facilitation services to the suppliers (Australian and offshore businesses) satisfies paragraphs (a) to (d) in section 9-5 of the GST Act as:

a)    you make the supply for consideration (the 23% add on to the travel costs charged by the suppliers); and

b)    your supply is made in the course of a business that you carry on; and

c)    your supply is connected with Australia as it is made through a business that is in Australia; and

d)    you are registered for GST.

Your supply is therefore a taxable supply to the extent that it is GST-free or input taxed.

Supply to Australian suppliers

Your supply of facilitation services made to Australian suppliers in Australia is not input taxed or GST-free under the GST law.

Your supply of facilitation services in this instance is a taxable supply under section 9-5 of the GST Act

Supply to offshore suppliers

For your supply of facilitation services made to the offshore suppliers it is relevant to consider item 2 in the table in subsection 38-190(1) of the GST Act (item 2) since the supply is not an input taxed supply.

Item 2

Under item 2 a supply of anything other than goods or real property to a non-resident who is not in Australia in relation to the supply is GST-free if:

a)    the supply of the thing is neither a supply of work performed on goods located in Australia nor a supply that is directly connected with real property situated in Australia; or

b)    the non-resident is not registered or required to be registered for GST and the acquisition of the thing is for the purpose of the overseas business carried on by the non-resident.

Only one of the paragraphs in item 2 needs to be satisfied.

Paragraph (a) of item 2 is satisfied where:

·                    Your supply of facilitation services is made to offshore suppliers, non-residents that carry on their business outside Australia and they are not in Australia in relation to your supply at the time you make your supply; and

·                    The facilitation services are neither a supply of work performed on goods located in Australia nor a supply that is directly connected with real property situated in Australia;

Your supply of facilitation services to the offshore suppliers is a GST-free supply under paragraph (a) of item 2 to the extent that subsection 38-190(3) of the GST Act does not apply to your supply.

Subsection 38-190(3) of the GST Act

Subsection 38-190(3) of the GST Act provides that without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in that table is not GST-free if:

a)    it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and

b)    the supply is provided or the agreement requires it to be provided to another entity in Australia; and

c)    for a supply other than an input taxed supply - none of the following applies:

                      i.         the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it;

                     ii.        the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or

                    iii.        the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient's acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.

Based on your terms and conditions, your supply of facilitation services is made and provided to the offshore suppliers when you supply them with your online platform and collect payments on their behalf for the sales they made to travellers. In this instance subsection 38-190(3) of the GST Act does not apply to your supply.

Your supply of facilitation services is therefore GST-free under item 2.