platforms allow other entities to make supplies through the store or market to consumers, in effect providing distribution services to these suppliers. Generally, in such cases the platform operator – the entity supplying access to the platform– will have most of the information about the recipients of supplies. Additionally, the operators are generally much larger and better resourced entities than most of the entities making supplies through the platform. They will also generally have significant influence over the terms of sales made using their platforms and either manage or closely regulate the payment process. this, where a supply is made through such an electronic distribution platform that is connected with the indirect tax zone as a result of these amendments, compliance and administration will be simplified if liability for GST rests on the platform operator rather than the supplier. On this basis, this Schedule shifts responsibility for the GST liability from a supplier to the operator of an electronic distribution platform for supplies that are inbound intangible consumer supplies made through the electronic distribution platform they operate. [Schedule 1, item 6, section 84-55] However, this will not occur if the platform operator does not control any of the key elements of the supply and the liability of the supplier is made clear in the related documentation. [Schedule 1, item 6, section 84-55] A platform operator will have no control of any of the key elements of the supply if they are not involved in authorising payment for or delivery of the supply, nor in setting the and conditions under which the supply is made. [Schedule 1, item 6, paragraph 84-55(4)(c)] Clarifying the liability of the supplier will require that a document issued to the recipient identifies the supply as being made by the supplier and the supplier and platform operator have agreed in writing that the supplier is responsible for the payment of GST on supplies. [Schedule 1, item 6, paragraphs 84-55(4)(b) and (c)] The amendments do not apply to supplies that are not inbound intangible consumer supplies such as supplies of goods or real property, supplies to registered entities and supplies performed in Australia – even where such supplies are made through the electronic distribution platform. Requirements to be an electronic distribution platform To be an electronic distribution platform, a platform must be operated by means of electronic communication within the meaning of the Electronic Transactions Act 1999 (broadly the communication of information by means of electro-magnetic energy). This means that it includes platforms operating over the internet and potentially by other
which it can make the necessary repairs, the goods will need to be either sent offshore to be repaired, or be repaired in the indirect tax zone on behalf of the manufacturer. If the non-resident manufacturer engages a GST registered entity in the indirect tax zone to undertake the repairs, then the repairer makes a taxable supply of repair services to the nonresident manufacturer. Provided the non-resident manufacturer is not in the indirect tax zone when the repair services are done, and if the warrantor acquires the services in carrying on its enterprise, the supply of the repair services can be GST free under item 2 in the table to subsection 38-190(1). However, the limitation to item 2 referred to above will apply in these circumstances because the repair services are provided to the entity that purchased the goods from the manufacturer. In these circumstances, the non-resident manufacturer will generally be entitled to ITCs for its acquisitions of the warranty services because those supplies are acquired in the course of carrying on its enterprise. However, to obtain these ITCs, the non-resident manufacturer will be required to register for GST and to lodge a business activity statement to claim the refund. Additionally, any replacement parts, including a full replacement of the goods that are supplied in accordance with the provision of a warranty, are not GST free if the goods remain within the indirect tax zone. Scope of amendments To prevent non-residents in these circumstances from being drawn into Australia’s GST system, these amendments ensure that a supply of a repair, renovation, modification or treatment of goods will be GST free if it is made to a non-resident that is not in the indirect tax. [Schedule 2, item 14, subsection 38-191(1)] In order for such supplies to be GST free: the non-resident recipient of the service must be neither registered nor required to be registered; the non-resident recipient must acquire the service supplied in carrying on its enterprise; the service must be done to meet the non-resident’s obligations under a warranty relating to the goods; and the warranty must have either been sold as part of a package with the supply of goods (such that the consideration for the warranty was included in the consideration for the supply of goods), or been a taxable supply separate from the supply of the goods.
Butcher Importers chooses to use the percentage option. Assuming that no percentage has been prescribed, the relevant uplift percentage is 10 percent. Therefore, Butcher Importers includes $12,500 rather than the actual transport, insurance and any additional loading, handling and facilitation costs in calculating the value of the taxable importation. Consequential amendments Interactions between reverse charging provisions and associate provisions These amendments clarify the interaction between the reverse charge provisions in Division 84 and the associate provisions in Division 72. Section 72-5 is an anti-avoidance provision which ensures that a supply can still be a taxable supply under section 9-5 in the absence of consideration when the supply is between associates. This is achieved by removing the requirement in section 9-5 for consideration to be given. However it does not explicitly remove the need for consideration to be provided for the supply to be reverse charged under Division 84. These amendments clarify that a supply between associates which meets the other requirements of Division 84 will still be a taxable supply in the absence of consideration. [Schedule 2, item 19, subsection 72-5(2)] The amendments also ensure that the ITC entitlement for supplies between associates for no consideration is worked out based on a formula in the associate rules in Division 72. In working out the ‘full input tax credit’ for the purpose of that formula, it is necessary to assume that the acquisition had been made solely for a creditable purpose despite the fact that Division 84 only applies to supplies where the corresponding acquisition is partly creditable. [Schedule 2, item 22, subsections 7245(1B) and (2)] Where there is inadequate consideration, the recipient uses a modified version of the partial ITC formula for reverse charged supplies in section 84-13. The ‘full input tax credit’ (a component of the formula) is worked out without grossing up what would have otherwise been the full input tax credit by 11/10 had the supply been a taxable supply under the basic rules in Division 9 rather than section 84-5. Given that the GST payable is worked out under section 84-12 by reference to price, and as a result of section 72-75 price is the GST exclusive market value, the full ITC payable is equal to the GST payable. It is therefore not appropriate to gross up the full input tax credit amount by the factor which usually applies to the formula in section 84-13. [Schedule 2, item 24, section