Private ruling: GST and supply of education course
Published: November 2013

Ruling: Q1: Is the supply by the Licensee to a client for the right to attend a GST-free education course a GST-free supply under section 9-30(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes

Relevant facts and circumstances: The Licensee is registered for goods and services tax (GST). The Licensee has entered into a licensee agreement with ABC Pty Ltd (ABC). The licensee agreement authorises the Licensee to market, promote, sell, deliver, facilitate and service the products developed by ABC. The Licensee markets the ABC courses to various entities or clients who enrol, through you. 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 ABC to the Licensee. The enrolment process is conducted on line, by the Licensee or the client. It involves logging onto ABC's website and inputting the details of each participant into ABC's database. Where GST is charged, the Licensee is entitled to the input tax credits. When a course is confirmed, participants are advised of the course dates, location etc. and an invoice is issued to the client in the Licensee's name. The invoice is for the supply of a right to receive the course which is supplied by ABC. Depending on how and where the courses are run, the Licensee or ABC may contract with facilitators, coaches, etc. for the provision of services in relation to the supply of the courses. Invoices for these services are inclusive of GST where the supplier is registered for GST. For each course conducted, ABC charges the Licensee a set percentage of the amount invoiced by the Licensee to the client. This amount is GST-inclusive and represents the supply by ABC of the rights under the license. There may be additional charges for further supplies made by ABC to the Licensee in relation to the supply of the course including handouts, venues, facilitators etc. Regardless of the level of marketing undertaken by the Licensee to sign up clients, there is no consideration received from ABC for this activity. It is considered to be part of the Licensee's business activities. Though the Licensee makes supplies such as marketing and teaching services to ABC, there is no separately identifiable consideration for these supplies. If the Licensee actively participates in the provision of the courses to the clients, there is no consideration received from ABC for this activity. A copy the Licence agreement between the Licensee and ABC has not been provided. However, your representative has stated the facts for this 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 ABC on a specified date.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 (GST Act) Section 9-30

Reasons for decision: Summary: Subsection 9-30 (1) of the GST ACT provides that a supply is GST- free if: (a) it is GST-free under Division 38 or under a provision of another Act; or (b) it is a supply of a right to receive a supply that would be GST free under paragraph (a). There is no requirement that the supply of right and the actual supply are made by the same entity. A copy of the licence agreement between the Licensee and ABC has not been supplied, however your representative has stated as a fact that for each course conducted by ABC, ABC charges the Licensee a set percentage of the amount which is invoiced to the client. This amount is GST inclusive and represents the supply by ABC of the rights under the license. In other words under the licence agreement, the supply the Licensee makes to the client is a supply of a right for them to participate in an accredited GST-free education course to be provided by ABC. Accordingly, as per paragraph 9-30(1)(b) of the GST Act when the Licensee supplies a client with the right to receive an accredited GST-free education course from ABC, the Licensee's supply to the client will also be GST-free. Section 9-5 of the GST Act provides that an entity makes a taxable supply if all of the following requirements are met: (a) the entity makes the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise carried on by the entity; and (c) the supply is connected with Australia; and (d) the entity 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 this case, your representative has stated as a fact that ABC does not provide the Licensee with any consideration for the supply of marketing and teaching services that the Licensee provides in signing up clients. It is therefore considered that no consideration is received in regards to this supply, and paragraph 9-5(a) of the GST Act is not satisfied. As such the Licensee does not make taxable supplies to ABC relation to the supply of marketing and teaching services.