Edited version of private advice

Authorisation Number: 1052212269582

Date of advice: 9 April 2024

Ruling

Subject: GST and progressive supplies

Question 1

Is the supply a single composite supply for GST purposes?

Answer

The supply is a single supply for GST purposes.

Question 2

If the answer to the above question is 'Yes' - is the GST payable on the supply attributable in accordance with Division 156 of the GST. That is, the supply made on a periodic basis (i.e., each month) for consideration also provided on a periodic basis?

Answer

Yes

The scheme commences on:

The date of issue of this notice of private ruling.

Relevant facts and circumstances

You are registered for GST. You currently report GST on a monthly basis using the non-cash (accruals) accounting method.

Your core business activity relates to the provision of veterinary products and delivery of solutions for animal identification, monitoring, farm management and traceability.

The supply is intended to provide farming customers with timely reproduction, health and nutrition insights of their livestock. It is anticipated that the majority of the customers in Australia will be local farmers who are registered for GST.

The supply is offered to customers as a 'bundled' supply of a range of complementary goods and services.

For completeness, customers do not have visibility over the cost of the separate components, as the value of the monthly subscription fee for each customer is fixed.

There is no up-front payment for the supply. It is paid for by the customer on a monthly basis.

Customers are able to purchase from you via the sales team. The sales team prepare a quote for the system after discussing the customer needs.

Each increase in livestock requires an increased number of subscriptions, and additional items will be supplied to customers accordingly.

Contractual Arrangements

It is anticipated that you and customers will enter into contractual arrangements in relation to the supply through acceptance of the Terms and Conditions contained in the Agreement. You provided a sample of an Agreement (as an Appendix to your application.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 Division 156

Reasons for decision

The product

Goods and Service Tax Ruling GSTR 2006/9 Goods and services tax: supplies sets out 16 propositions relating to supplies. Proposition 3 at paragraph 64 says that if all parts in a supply have the same GST treatment, then there is no requirement to separately identify each part.

Your supply is the supply of a number of components that are all taxable supplies. As such, there is no need to apportion the value of the supply. There is a single monthly fee that covers the supply of all the components of the supply.

Division 156

If you account for GST on a basis other than cash, under Division 29 you attribute all the GST payable on a taxable supply to the earlier of the tax periods when:

•         any of the consideration for the supply is received; or

•         an invoice is issued for the supply.

However, where you make a supply for a period or on a progressive basis and for consideration that is to be provided on a progressive or periodic basis, you attribute the GST as if each progressive or periodic component of the supply that you make were a separate supply. Subsection 156-5(1) requires you to attribute the GST payable on each notional separate supply in accordance with the basic attribution rules (subsection 29-5(1)).

Goods and Services Tax Ruling GSTR 2000/35 Goods and services tax: Division 156 - supplies and acquisitions made on a progressive or periodic basis describes how to attribute goods and services tax (GST) and input tax credits with respect to supplies and acquisitions made for a period or on a progressive basis.

Division 156 applies where a taxable supply or creditable acquisition is made:

•         for a period; or

•         on a progressive basis

and, in either case, consideration is made:

•         on a progressive basis; or

•         on a periodic basis.

A supply or acquisition you make is on a progressive basis when the contract or agreement provides for stages of the supply during the course of the supply. A supply may also be a progressive supply where, under a contract, goods or services are to be supplied on an ongoing basis.

You provide consideration on a periodic basis when it is made in equal or unequal instalments provided upon expiration of specified periods. An example of consideration on a periodic basis is where payments are made monthly under an agreement to lease an asset.

If the supply or acquisition that you make is one to which Division 156 applies, then you attribute GST and input tax credits as if each component of the supply or acquisition were a separate supply or acquisition.

Your supply does not require the payment of an upfront amount. Consideration is paid through a monthly fee. The payment of the monthly fee allows farmers to receive ongoing data about timely reproduction, health and nutrition insights of their livestock. As such, it is a supply made on a progressive basis, the terms of which are set out in your agreement.