Private ruling: GST and RCTI
Date of advice: 23 December 2015
Published: March 2016

Ruling: Q1: Will the Commissioner determine in writing under subsection 29-70(3) of the A New Tax System (Goods and Services Tax) Act 1999 a class of tax invoices that may be issued by an entity as recipient created tax invoices in the circumstances of the sales of things by the sellers to the buyers as described in the facts? | A1: No, the Commissioner will not determine in writing the entity may issue recipient created tax invoices to the sellers as the entity is not the recipient of the supplies made by the seller.

Relevant facts and circumstances: An entity operates an electronic market as a platform for sellers to sell things. Both sellers and buyers need to register with the entity. Upon registration, the entity maintains an account for a seller or buyer. Buyers and sellers can access their accounts for information by logging onto the entity's website. They can download or view any accounting record(s) maintained by the entity for their accounts at their convenience. Accounting records include invoices, receipts, other records and statements by periods. Before the sale of the thing, all rights, title and interest to it is the property of the seller. Upon the sale, all rights, title and interest to the thing will transfer to the buyer. The entity charges the seller the sell trade commission which is calculated as a percentage of the selling price. It is this amount (sell trade commission) that GST is calculated on to arrive at the seller's total cost of selling the thing. The entity charges the buyer the buy trade commission which is calculated as a percentage of the selling price and added to the selling price. It is this amount (selling price + buy trade commission) that GST is calculated on to arrive at the buyer's total cost of purchasing the thing. The net sale proceeds that flow to the seller is calculated as the selling price less the sell trade commission plus GST: selling price - (sell trade commission + GST).

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-40, | A New Tax System (Goods and Services Tax) Act 1999 Section 11-20, | A New Tax System (Goods and Services Tax) Act 1999 Section 29-10, | A New Tax System (Goods and Services Tax) Act 1999 Section 29-70, | A New Tax System (Goods and Services Tax) Act 1999 Subsection 29-70(3), and | A New Tax System (Goods and Services Tax) Act 1999 Section 153-15.

Reasons for decision: Summary: For GST purposes, when a thing is sold in the market operated by the entity, there are three transactions: 1. The seller makes a supply of (sells) the thing to the buyer for the GST exclusive selling price. Put simply, the buyer is the recipient of the supply of the thing by the seller and the entity is not. That is, the entity does not buy the thing from the seller and then sells it to the buyer. 2. The entity supplies (provides) services to the seller in relation to the sale for a sell trade commission. 3. The entity supplies (provides) services to the buyer in relation to the sale for a buy trade commission. The entity is liable for GST on the taxable supply of services made to the seller and buyer for the sell trade commission and buy trade commission respectively. The entity issues tax invoices to the seller and buyer. Each recipient of the taxable supply of services may be entitled to the input tax credit (ITC) equal to the GST included in the sell trade commission or buy trade commission and may attribute the ITC. When the thing is sold in the market, although the seller has no knowledge of the selling price, it has a GST liability. The entity charges the sell trade commission as a percentage of the selling price for the services supplied to the seller. The entity needs to issue a tax invoice to the seller so that the latter may attribute the ITC of the GST included in the sell trade commission. Upon receiving the tax invoice, the seller knows the selling price and can determine its GST liability upon selling the thing. Before the sale of the thing, all rights, title and interest to it is the property of the seller. All sales on the market by a seller to a buyer are final, and there will be no refunds once a thing has been sold by a seller. Upon the sale, all rights, title and interest to the thing will transfer to the buyer. In these circumstances of a sale of a thing by a seller to a buyer in the market, we consider that the entity acts as an agent for the seller in the sale to the buyer. The entity can issue a tax invoice to the buyer for the sale-supply of the thing. However, the entity has no GST liability upon the supply. The seller has GST liability upon the supply. The buyer may be entitled to the ITC equal to the GST payable on the supply of the thing acquired from the seller and the entity is not. Therefore, the Commissioner will not determine in writing the entity may issue recipient created tax invoices to the sellers as the entity is not the recipient of the supplies.