Private ruling: GST and recipient created tax invoice
Published: January 2012

Ruling: Q1: Can you issue a recipient created tax invoice (RCTI) to an Australian business in accordance with A New Tax System (Goods and Services Tax) Act 1999 Classes of Recipient Created Tax Invoice Determination (No13) of 2000 (RCTI Determination 2000/13) under the standard Services Agreement you provided to the Australian Taxation Office (ATO)? | A1: No, you cannot issue an RCTI in accordance with RCTI Determination 2000/13 under the standard Advertising Services Agreement you provided to the ATO.

Relevant facts and circumstances: You are an Australian company and are registered for the goods and services tax (GST). You sell products to purchasers as agent for Australian businesses ('business') with whom you have a standard Services Agreement ('agreement') and in return you receive a commission for each sale. You have provided us with a copy of this agreement. The purchasers complete the purchase transaction with you and receive from you a voucher entitling them to receive the promoted product, a receipt and a tax invoice that detailed the GST collected and your name. For the purposes of the GST law, the agreement provides the following: · you will be treated as the principal in making supplies including selling the product via your website. · You will issue tax invoices to purchasers of the product in your name and the business does not need to issue such invoices. · As a selling agent you will issue an RCTI to the business in respect of supplies of good and related products by the business. · The business acknowledges that they are registered for GST and they will notify you if they cease to be registered and you acknowledge that you are registered for GST and you will notify the golf course if you cease to be registered. The provision of the goods and/or services as described in the product description is the business's responsibility as it is the business that provides the actual product to the purchaser of the voucher. At the conclusion of the promotion period you issue an RCTI to the business specifying how many products were sold. You referred to RCTI Determination 2000/13 in regard to your eligibility to issue an RCTI to the business. You decided to issue RCTIs to the businesses because you are the one that calculate the value of the supply and the commission received after an offer is made. You also provide the businesses with information about the sale and commission.

Relevant legislative provisions: 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 153-55.

Reasons for decision: Summary: Before we consider whether you can issue an RCTI in accordance with RCTI Determination 2000/13 we first need to determine the kind of arrangement you have in place with the business and the effect of the arrangement. From the information received and based on the agreement you gave to us, your arrangement with the business for GST purposes is a subdivision 153-B arrangement under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as you and the business agreed to be treated as acting principal to principal in regard to supplies that the business makes to the purchasers through you. Section 153-55 of the GST Act details the effect of an arrangement under subdivision153-B of the GST Act on supplies that a principal makes to third party through an intermediary. | Detailed Reasoning - Section 153-55 states:: (1) A *taxable supply that the principal makes to a third party through the intermediary is taken to be a supply that is a taxable supply made by the intermediary to the third party, and not by the principal, if: (a ) the supply is of a kind to which the arrangement applies; and (b ) the supply is made in accordance with the arrangement; and (c) both the principal and the intermediary are *registered. (2) In addition, the principal is taken to make a supply that is a *taxable supply to the intermediary. This supply is taken: (a) to be a supply of the same thing as is supplied in the taxable supply (the intermediary's supply ) that the intermediary is taken to make; and (b) to have a *value equal to 10/11 of the amount that is payable to the principal by the intermediary in respect of the intermediary's supply. The intermediary is taken to make a corresponding *creditable acquisition from the principal. (3) If the principal pays, or is liable to pay, an amount, as a commission or similar payment, to the intermediary for the intermediary's supply to the third party: (a) for the purpose of paragraph (2)(b), the amount payable by the intermediary to the principal is taken to be reduced by the amount the principal pays, or is liable to pay, to the intermediary; and (b) the supply by the intermediary to the principal, to which the principal's payment or liability relates, is not a *taxable supply. (4) However, this section no longer applies, and is taken never to have applied, if the principal issues to the third party, in the principal's own name, any *tax invoice or *adjustment note relating to the supply. (5) This section has effect despite section 9-5 (which is about what are taxable supplies), section 9-75 (which is about the value of taxable supplies) and section 11-5 (which is about what are creditable acquisitions). (* denotes a defined term in section 195-1 of the GST Act) The general effect of entering into a subdivision 153-B arrangement in respect of supplies is that the principal and the intermediary treat the taxable supply of goods or services that the principal makes to third parties through the intermediary as two separate supplies: · A taxable supply made to a third party is taken to be a taxable supply made by the intermediary and they will issue a tax invoice to the third party. The intermediary will be required to remit 1/11 of the price of the supply to the ATO. · The principal is taken to have made a taxable supply to the intermediary of the same thing that the intermediary is taken to supply to the third party. The value of the supply is determined by reference to the amount the intermediary is actually required to pay the principal. This amount is the price charged and paid by the third party for the supply less the amount the intermediary is permitted (under the contract with the principal) to keep as a commission or similar remuneration for intermediary services. Accordingly, the effects of the subdivision 153-B arrangement you have with the business under the agreement you gave to us are that you and the business act as principal to principal and treat supplies you make to a third party on behalf of the business as two separate supplies and acquisitions as follows: · When you make a taxable supply to a third party on behalf of the business you will be taken to have made a taxable supply in your own right. You will be liable for GST for that taxable supply. · The business is taken to have made a taxable supply to you of the same thing that you are taken to have supplied. The business will issue a tax invoice to you and they will be required to remit 1/11 of the price of the supply to the ATO; and · You will be entitled to claim an input tax credit for the creditable acquisition you have made from the business on receipt of the tax invoice. For more information on subdivision 153-B arrangement please refer to the Goods and Services Tax Ruling GSTR 2000/37 which is available at www.ato.gov.au RCTI 2000/13 Subsection 29-70(3) of the GST Act provides that an RCTI is a tax invoice belonging to a class of tax invoices that the Commissioner has determined in writing may be issued by the recipient of a taxable supply. Goods and Services Tax Ruling GSTR 2000/10 outlines the circumstances in which a recipient can issue RCTIs. An entity can issue RCTIs if the Commissioner has determined in writing that the nature of the industry in which the entity operates warrants the use of RCTIs and all the requirements in that determination are satisfied. The Commissioner has issued a determination allowing entities who are the recipient of a supply made by a selling agency to issue RCTIs where the value of the supply is calculated by the recipient rather than the supplier (RCTI 2000/13). RCTI 2000/13 applies to recipients of selling agent services where selling agent services means the collection and delivery of purchase order by a selling agent to a seller. RCTI 2000/13 also states that the value of the services acquired must be established by the recipient after the supply is made using a calculation process. Applying your arrangement to the requirements of RCTI 2000/13 Based on the information received, your arrangement with the business does not satisfy the requirements in RCTI 2000/13 as: · The business is not acquiring selling agency services from you and instead is making a supply to you which you onsell to the purchaser. · The agreement provides for a commission to be paid to you. However, since you are acting in your own right when supplying the business's supply to the purchaser, this commission is part of the consideration you receive when making your supply to the purchaser and therefore is not considered to be consideration of agency services acquired by the business. To summarise, you cannot issue an RCTI in accordance with RCTI Determination 2000/13 to the business for the supplies that the business makes to you since the requirements in RCTI 2000/13 are not satisfied.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.