Private ruling: Goods and services tax (GST) and supply of right to attend a course
Published: October 2013

Ruling: Q1: Is the supply made by you to a client of a right to attend a GST-free education course GST-free under paragraph 9-30(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes, the supply made by you to a client of a right to attend a GST-free education course is GST-free under paragraph 9-30(1)(b) of the GST Act. | Q2: Is the supply of marketing and teaching services by you to the education institution a taxable supply where there is no separately identifiable consideration provided by the education institution for these services? | A2: No, the supply of marketing and teaching services by you to the education institution is not a taxable supply where there is no separately identifiable consideration provided by the education institution for these services.

Relevant facts and circumstances: You are registered for GST. You entered into a licensee agreement (Agreement) with the education institution, a Registered Training Organisation. The Agreement authorises the licensee (you) to market, promote, sell, deliver, facilitate and service the products developed by the education institution. You market the education institution courses to various entities or clients (usually bodies corporate or government entities) who will enrol, through you, any number of their staff as appropriate to attend various courses. You make an upfront payment which covers the initial supply of various training materials and services which enables you to commence operation. GST is charged on all components of this supply except for the GST-free supply of training provided by the education institution to you. Where GST is charged on a supply made by the education institution to you, you are entitled to an input tax credit. You have given written authority to the education institution to seek a GST private ruling on your behalf in regard to the supplies to be made under the Agreement. Consequently, the education institution's tax agent has applied for a GST private ruling for you. The tax agent advised that the facts surrounding the application for a GST private ruling are identical to all previous applications made for other licensees, and to the facts contained in the GST private ruling issued to the education institution on a certain date. The facts contained in the education institution's private ruling that are relevant to this private ruling are as follows: · The education institution is a Registered Training Organisation and is registered for GST. · When a licensee is signed up by the education institution, the agreement grants the licensee the right and authority to market, promote, sell, deliver, facilitate and service the accredited education institution's courses. · The licensee is registered for GST. · The licensee makes an upfront payment which covers the initial supply of various training materials and services which enables the licensee to commence operation. GST is charged on all components of this supply except for the GST-free supply of training provided by the education institution to the licensee. Where GST is charged on a supply made by the education institution to a licensee, the licensee is entitled to an input tax credit. · The licensee markets the education institution's courses to various entities or clients (usually bodies corporate or government entities) who will enrol, through the licensee, any number of their staff, as appropriate to attend various courses. · The enrolment process is conducted online, usually by the licensee, but sometimes by the client. It involves logging onto the education institution's website and inputting the details of each participant into the education institution's database. · When a course is confirmed, participants are advised of the course dates, location, and so on, and an invoice is issued to the client in the name of the licensee. The invoice is for the supply of a right to receive the course which is supplied by the education institution. · Depending on how and where the courses are being run, the licensee or the education institution may contract with facilitators, coaches, and so on, for the provision of services relating to the supply of the courses. Invoices for these services will be inclusive of GST where the supplier is registered for GST. · For each course conducted, the education institution charges the licensee a set percentage (say a certain percentage of the amount invoiced by the licensee. This certain percentage is GST-inclusive and represents the supply by the education institution of the rights under the licence. · There may be additional charges for further supplies made by the education institution to the licensee in relation to the supply of the course, for example handouts, venues and facilitators. · The balance of the moneys paid by the clients to the licensee represents the profit on the licensee's supply. · Regardless of the level of marketing undertaken by the licensee to sign up clients, there is no consideration received from the education institution for this activity. It is considered to be part of the business activities of the licensee. While there are supplies made by the licensee to the education institution, such as marketing and teaching services, there is no separately identifiable consideration for such supplies. · If the licensee actively participates in the provision of the courses to the clients (for example, facilitation, coaching and so on), there is no consideration received from the education institution for this activity.

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 paragraph 38-85(a) | A New Tax System (Goods and Services Tax) Act 1999 section 195-1 | A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-30(1)(b)

Reasons for decision: Summary: Paragraph 9-30(1)(b) of the GST Act provides that a supply of a right to receive a supply that is GST-free under Division 38 of the GST Act is also a GST-free supply. There is no requirement that the supply of a right and the actual supply are made by the same entity. From the facts given, when you, the licensee, act within the Agreement, the supply you make to the students (participants/clients) is a supply of a right to participate in an accredited GST-free education course to be provided by the education institution Accordingly, when you supply a client with the right to receive an accredited GST-free education course from the education institution, your supply to the client is GST-free under paragraph 9-30(1)(b) of the GST Act. Section 9-5 of the GST Act provides that an entity makes a taxable supply if all of the following requirements are met: · the entity makes the supply for consideration; and · the supply is made in the course or furtherance of an enterprise carried on by the entity; and · the supply is connected with Australia; and · the entity is registered or required to be registered for GST; and · the supply is neither GST-free or input taxed. In this case, the education institution does not provide you with any consideration for the supply of marketing and teaching services you provide under the agreement. This supply does not satisfy one of the requirements of a taxable supply under section 9-5 of the GST Act. Therefore, you do not make a taxable supply to the education institution in relation to the supply of marketing and teaching services.