Edited version of private advice

Authorisation Number: 1051975968705

Date of advice: 26 April 2022

Ruling

Subject: Supply of water transported and delivered via road by water tank truck

Question

Is your supply of water to customers a GST-free supply under section 38-285 of the GST Act?

Answer

Yes. Your supply of water delivered via road by water tank truck to your customers is a GST-free supply under section 38-285 of the GST Act as it is a supply of water and it does not come within the exception which relates to supplies of water in or to containers that have a capacity of less than 100 litres.

This ruling applies for the following period:

26 April 20XX to 25 April 20XX

The scheme commences on:

26 April 20XX

Relevant facts and circumstances

You carry on an enterprise as a sole trader.

You have an ABN, with three registered business names.

Your annual GST turnover is over $XXX and you are registered for GST.

You supply water for human and livestock consumption via a water tank truck to customers in regional Western Australia that do not have mains water access.

When a customer needs water delivered to their water tanks, they contact you and ask you to supply water.

You purchase the water from two main water suppliers, being two different councils ("main water suppliers").

You source the water from the main water suppliers' standpipes on an "as-needed" basis, depending on the demand from your customers.

The main water suppliers bill you for the water they supply you either as you collect the water or after you collect the water.

There is no agency or subcontract arrangement between you and the main water suppliers. The contract with your customers as principal and on-supply the water to them in your own right. The main water supplier does not know who the end recipient of the water is.

The water you supply is delivered in a 12,500-litre tanker and transferred into the customers' water tanks. The customers' water tanks a have a capacity of over 100 litres.

You bill your customers for both the water and transportation services provided to them as one charge.

The transportation services that you supply are part of the agreement to supply water to your customers.

You do not have a formal written agreement with your customers. Your only agreement is a verbal agreement to supply water to your customers which includes transportation services.

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 38-285

Reasons for decision

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

(a)  the supplier makes the supply for consideration; and

(b)  the supply is made in the course or furtherance of an enterprise that the supplier carries on; 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.

In your circumstances, all of the above requirements of section 9-5 are satisfied. However, your supply of water is not a taxable supply to the extent that it is GST-free or input taxed.

GST-free supplies

Section 38-285 of the GST Act provides that:

(1)  A supply of water is GST-free.

(2)  However, a supply of water is not GST-free under this section if it is:

(a)  supplied in a container; or

(b)  transferred into a container;

that has a capacity of less than 100 litres or such other quantity as the regulations specify.

(3)  It does not matter whether or not the amount of water supplied or transferred fills the container.

A supply of water refers to the delivery or the making available of water, as goods, to a recipient's premises. Where you have purchased the water from a main water supplier and on-supplied it to your customers in your own right, rather than as a subcontractor or as part of an agency agreement, the supply of water and transportation services by you to your customers is GST-free under section 38-285 of the GST Act.

You are not a subcontractor or agent of the main water supplier. There is no written or verbal contract or any formal or informal arrangement with the main water suppliers, apart from your purchase of the water from them. You then on-supply the water to your customers.

Accordingly, given that you purchase water from the main water supplier and on-supply the water to your customers in your own right to fulfil your obligation of delivering or the making of water available, as goods, to your customers' premises (including billing your customers for the water), it is our view that you are a supplier of water for the purpose of subsection 38-285(1) of the GST Act.

The water you supply to your customers is delivered in a 12,500-litre tanker and transferred into the customers' water tanks, which all have a capacity of over 100 litres. Based on these facts, you do not fall within the exception in subsection 38-285(2) making the supply of water GST-free.

Delivery as part of the supply of water

The transportation and delivery of the water is not a separate supply. This is further evidenced by the fact that you do not charge your customers separately for the delivery of water. Hence, your supply of water constitutes delivered goods such that delivery is integral, ancillary or incident to the supply of the goods as opposed to the delivery being significant and an aim in itself.

For these reasons, it is our view that the supply of water (including the transportation services which form part of your supply of water) meet the requirements of section 38-285 of the GST Act and is therefore GST-free.

Limitation of this ruling - water in a container that has a capacity of less than 100 litres

This ruling does not apply to the supply of water in a container or transferred into a container that has a capacity of less than 100 litres.