ATO ID 2004/155: GST and supply of a package consisting of an education course and other supplies
Date of decision: 6 March 2003
Business line: Indirect Tax

Issue
Is the entity, a government school, making a mixed supply that must be valued under section 9-80 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies overseas students with a package consisting of an English language course, airport pick up and delivery, accommodation, food and social activities?

Decision
Yes, the entity is making a mixed supply that must be valued under section 9-80 of the GST Act. The supply of the English language course is GST-free under section 38-85 of the GST Act and the supplies of airport pick up and delivery, accommodation, food and social activities are taxable supplies under section 9-5 of the GST Act.

Facts
The entity is a government school. The entity supplies overseas students with a package consisting of an English language course, airport pickup and delivery, accommodation, food and a range of social activities. The English language course the entity supplies is designed to improve the student's written and verbal English communication skills. This course is accredited as an English Language Intensive Course for Overseas Students (ELICOS). The entity is accredited to provide this course by the State or Territory authority responsible for their accreditation and appears on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS). The airport pickup and delivery is carried out by the entity's staff. The entity contracts with motels to provide the students with accommodation and food. The food is supplied and consumed on the motel's premises. The social activities organised by the entity are predominantly for recreational purposes. The activities are for the students' enjoyment and to provide them with opportunities to socialise. The activities are not a part of the course curriculum. The entity charges the students an all-inclusive fee for the package that covers all of the supplies. The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for decision
Summary: Subsection 9-80(1) of the GST Act provides that if a supply is: the value of the taxable part must be apportioned. A supply that is partly taxable and partly GST-free or input taxed is referred to as mixed supply. Paragraph 19 of Goods and Services Tax Ruling GSTR 2001/8 provides that where a transaction comprises a bundle of features and acts, all the transaction's circumstances must be considered to ascertain its essential character. A mixed supply has separately identifiable parts that the GST Act treats as taxable and non-taxable, and these parts are not just integral, ancillary or incidental in relation to the whole supply. Whether a particular part is integral, ancillary or incidental in relation to the whole supply is a question of fact and degree. The entity's package consists of an English language course, airport pickup and delivery, accommodation, food and a range of social activities. Each of these parts are sufficient enough in their own right to be regarded as separately identifiable parts and not as integral, ancillary or incidental to each other. As such, the package is a mixed supply and it is necessary to identify which supplies in the package are taxable and non-taxable. Section 9-5 of the GST Act provides that an entity makes a taxable supply when the requirements in that section are met. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed. The entity is registered for GST and its supply of the package satisfies the other positive limbs of section 9-5 of the GST Act. Therefore, the entity's supply of the package is a taxable supply unless the separate parts of the package are identified as GST-free or input taxed. Paragraph 38-85(a) of the GST Act provides that a supply is GST-free if the supply is an education course. Section 195-1 of the GST Act defines 'education course' to include, amongst other things, an English language course for overseas students. An 'English language course for overseas students' is defined in section 195-1 of the GST Act to mean a course of study or education supplied to overseas students that: The English language course the entity supplies is designed to improve the student's written and verbal English communication skills and is accredited as an ELICOS course. The entity is accredited to provide this course by the State or Territory authority responsible for their accreditation. Therefore, the entity's course satisfies the definition of an English language course and is GST-free under paragraph 38-85(a) of the GST Act. Paragraph 38-85(b) of the GST Act provides that a supply is GST-free if the supply is administrative services directly related to the supply of a GST-free education course, but only if they are provided by the supplier of the course. The airport pick up and delivery carried out by the entity's staff is a service provided to allow students to attend the course rather an administrative service directly related to its supply of the English language course. Therefore, the airport pick up and delivery is not GST-free under paragraph 38-85(b) of the GST Act. Section 38-105 of the GST Act provides that a supply is GST-free if it is a supply of student accommodation to students undertaking a primary course, a secondary course or a special education course. The entity's course is an English language course and therefore, the accommodation is not GST-free under section 38-105 of the GST Act. Under section 40-35 of the GST Act, a supply of premises that is by way of lease, hire or licence is input taxed if it is a supply of residential premises other than commercial residential premises. A motel is one of the classes of premises specified in the definition of commercial residential premises in section 195-1 of the GST Act. The entity's supply of accommodation in motels is not input taxed under section 40-35 of the GST Act. Section 38-2 of the GST Act provides that a supply of food is GST-free. However, under subsection 38-3(1) of the GST Act, the supply of food is not GST-free if it is for consumption on the premises from which it is supplied. The food is supplied and consumed on the motel's premises. Therefore, the supply of food is not GST-free under section 38-2 of the GST Act. Section 38-90 of the GST Act provides that a supply is GST-free if it is a supply of an excursion or field trip, but only if the excursion or field trip: The social activities are organised by the entity for the students' enjoyment and to provide them with opportunities to socialise. That is, they are predominately for recreational purposes. Further, they are not a part of the course curriculum. As such, the social activities do not have a direct relationship to the course curriculum. Therefore, the social activities are not GST-free under section 38-90 of the GST Act. The supply of the English language course included in the entity's package is GST-free, while the supplies of the airport pick up and delivery, accommodation, food and social activities are taxable supplies under section 9-5 of the GST Act. Therefore, the entity is making a mixed supply of a GST-free supply and taxable supplies that must be valued under section 9-80 of the GST Act when it supplies overseas students with the package. Note: Subsection 9-80(2) of the GST Act provides that the value of the mixed supply that represents the taxable supply is calculated in accordance with the following formula: (Price of the supply * 10) / (10 + Taxable proportion) where: 'Taxable proportion' is the proportion of the value of the supply that represents the value of the taxable supply, as expressed as a number between '0' and '1'. GSTR 2001/8 provides guidance on the apportionment of consideration for a supply that includes taxable and non-taxable parts.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-80 subsection 9-80(1) subsection 9-80(2) section 38-2 subsection 38-3(1) paragraph 38-85(a) paragraph 38-85(b) section 38-90 section 38-105 section 40-35 section 195-1
Related public rulings and determinations: Goods and Services Tax Ruling GSTR 2001/8
Subject references: Goods and services tax GST free GST education Education course administrative services Education courses English language course for overseas students Education excursions GST Food Prepared foods GST property & construction GST commercial residential premises GST supplies & acquisitions GST supply Taxable supply