In April 2012, over 60 private rulings dealing with GST were published on the private rulings register.

The private rulings I found interesting deal with GST refunds and going concerns.  The refund ruling appears to take the view that the Commissioner can rely on s 105-65 in the context of the operation of the adjustment provisions in Division 19 of the GST Act.

Ruling No. 1012091511798 – GST and refunds of overpayments

This application involves the perennial question of whether the Commissioner will exercise his discretion in s 105-65 and refund overpaid GST.  Where this ruling is interesting is that it appears to involve the question of whether that discretion will (or indeed can) be exercised where the refund is otherwise payable by way of an adjustment pursuant to Division 19 of the GST Act.

The facts of the ruling involve the sale of land by way of a terms contract where the parties entered into an agreement to terminate the sale contract, whereby the instalment payments were to be repaid to the purchaser.  GST had been paid on the instalments by the vendor and the purchaser had claimed input tax credits.

While it is not clear from the ruling, it appears that the basis for the refund arose from the operation of the adjustment provisions in Division 19.  Further, the Commissioner considers that s 105-65 applies because the taxpayer treated an arrangement as giving rise to a taxable supply but it did not give rise to a taxable supply.  This may be considered to be a controversial view, given that the apparent intent of s 105-65 is to address the implications of parties mistakenly treating supplies as taxable where they are not – e.g., because they are GST-free.  In the present circumstances, the parties at all times correctly treated the transaction as taxable until the transaction was cancelled, triggering Division 19 which operates to unwind the GST consequences of the transaction.  One may question whether s 105-65 should interfere with that process.

Ruling No 10102090255175 – GST and going concerns

The issue in this ruling was whether the sale of a motor vehicle repair business was GST-free as the supply of a going concern.  What I found interesting was the discussion of the implications of the statutory licence which was necessary to operate the business, but could not be transferred by the vendor.  The agreement provided that if the licence could not be transferred to the purchaser, that the vendor would make all reasonable efforts to have a new operating licence issued to the purchaser.  The ruling took the view that provided a new licence was issued to the purchaser, the vendor would be “considered to have have supplied the purchaser with an operating licence in respect of the relevant premises, for the purposes of the going concern provisions”.

I personally struggle with the conclusion in the ruling, essentially because the requirement of s 38-325(2) of the GST Act is that “the supplier supplies to the recipient all of the things that are necessary for the continued operation of an enterprise”.  In circumstances where the supplier has no ability to transfer a statutory licence and a new licence must be issued to the purchaser, I cannot see how the words of s 38-325(2) can be satisfied.

The private ruling refers to paragraph 53 of GSTR 2002/5 and seeks to address the issue in the following way:

In accordance with paragraph 53 of GSTR 2002/5, the supply of a thing which is incapable of assignment or supply because of a statutory or legal impediment, but which is necessary for the continued operation of an enterprise by a party other than the supplier is taken to be a supply to the purchaser of that thing for the purposes of section 38-325 of the GST Act, where the following criteria are met:

– the vendor of the enterprise makes all reasonable efforts to have the thing supplied to the recipient, for example, by way of surrender;

– the supply to the purchaser is by a statutory authority or other party to the relevant contract with the vendor; and

– the thing is actually supplied to the purchaser by a party other than the vendor.

While I can appreciate the commercial practicality of this approach, I struggle with how it can fit within the clear words of the section.  In recent times, the Federal Court appears to have moved away from the purposive, “practical business tax”, approach to the interpretation of the GST Act, towards a more literal construction.  I do wonder what the Federal Court would make of the question.

LIST OF RULINGS

Taxable supply

• GST and ex-gratia payments made in lieu of local government rates – whether ex-gratia payments made by A to B (a local government authority) pursuant to obligations under Lease in lieu of local government rates are treated as consideration for supplies made by B to A
• GST and trustee services – whether an entity (in its personal capacity) make a taxable supply of trustee services to a superannuation fund where the consideration is deducted from the Fund and includes an “adviser fee”
• GST and out of court settlements – whether the amount received as a result of an out of court settlement consideration for  taxable supply – amount received as settlement for action to recover amounts payable under an agreement to reimburse claimant for certain expenses arising out of a sale of land to a third party
• GST and monies held in trust and supply of management/marketing service – whether money received in trust for payment of prizes consideration for a supply – whether entity making taxable supplies when supplying management/marketing services to your client
• GST and court settlement – whether GST payable on proceeds from settlement of dispute over purchaser of licence agreement – whether sufficient nexus between surrender of licence agreement and receipt of payment
• GST and internet sales – whether GST payable on the sale of goods delivered direct from overseas supplier to Australian-based customer of Australian retailer
• GST and roofing work – whether GST payable on supply and fitting of roof to a leased residential house owned by a non-resident
• GST and settlement and release agreement – whether entity makes a taxable supply under a settlement and release agreement for a damages claim
• GST and tutoring service – whether GST payable on the supply of tutoring services to students
• GST and sale of diesel imported from overseas – whether GST payable on diesel sold to resident customer where diesel imported from overseas and delivered to customer in Australia
• GST and supply of assessment services – whether GST payable on the supply of assessment services to registered training organisations
• GST and reimbursement – whether the entity is required to impose GST on the GST inclusive or exclusive costs it incurs and passes on to its clients
• GST and sale concluded overseas – whether GST payable on sale of equipment concluded while entity overseas where the equipment is to be imported by buyer but payment is made to entity in Australia

Creditable acquisitions

• GST and export of goods – whether entity making a creditable acquisition of goods when purchase goods on a direct container terminal (DCT) basis for export overseas within 60 days
• GST and reimbursements – whether entity entitled to claim input tax credits for acquisition of medical services acquired as a principal under an agreement for the provision of medical examinations by third party
• GST and entitlement to input tax credits beyond car limit – whether input tax credits for creditable acquisition of a vehicle subject to the limit under s 69-10 of the GST Act
• ABN registration, GST registration and entitlement to input tax credits – whether a service trust can be registered for ABN and GST, whether a service trust makes a creditable acquisition when it acquires a thing through an inbound tour operator
• GST and hire purchase agreement – how to attribute input tax credits for equipment purchased under hire purchase agreement
• GST and acquisition of a GST-free going concern – whether an entity entitled to input tax credits for acquisition of retail store in shopping centre, including lease
• GST and the supply of services – whether entitled to RITC for the acquisition of merchant services relating to; the ongoing operability of ATMs on those merchant’s premises; the ongoing operability of the entity’s ATMs on those premises

Real property

• GST and sale of property – whether GST payable by benevolent charitable institution on sale of residential premises used as office
• GST and the supply of a going concern – whether the sale of properties comprising two parcels of land is the sale of a going concern (one lot containing a shopping centre and the other lot vacant) – whether purchaser entitled to input tax credits
• GST and the supply of real property by lease – whether lease of property a taxable supply or a mixed supply of residential and commercial areas – apportionment
• GST and going concerns, guest accommodation premises and holiday accommodation – whether supply of guest accommodation an input taxed supply of residential premises – whether supply of farm business assets together with lease of farm property to an associate the supply of a going concern – whether lease of farm property to associate GST-free – whether transfer of assets of the guest accommodation to an associate a supply of a going concern
• GST and going concerns – whether the sale of a motor vehicle repair business is the supply of a going concern
• GST and supply of land – whether the part sale of farmland to a government entity subject to GST
• GST and margin scheme – whether the margin scheme is applicable to the sale of four subdivided lots – appropriate method of apportionment
• GST and claiming input tax credits for construction of a services apartment complex – whether entity making taxable supplies of serviced apartments for short term use by the public where intention is to supply the accommodation in own right and to engage a manager to assist in the day to day operations
• GST and security deposits – whether higher than standard deposits received from non-resident and resident purchasers of “off the plan” lots are security deposits for the purposes of Division 99 of the GST Act
• GST and sale of property – whether sale of co-owned property for the purpose of subdivision subject to GST – whether enterprise carried on
• GST and margin scheme – whether receiver of entity (as trustee of trust) is able to use the margin scheme to calculate the GST liability from the sale of land owned by the trust
• GST and supply by way of lease – whether supply of land that has been subject to a lease and is assigned to a purchaser an input taxed supply
• GST and sale of subdivided property – whether the subdivision and sale of property subject to GST – whether carrying on an enterprise
• GST and sale of property – whether the sale of property containing dilapidated house subject to GST
• GST and supply of a GST-free going concern – whether sale of property with the transfer of a lease is a going concern
• GST and Property transaction – whether the development of a residential property into to residential townhouses for sale will be subject to GST – whether carrying on an enterprise
• GST and sale of property – whether liquidated entity reinstated for the sole purpose of selling remaining land liable to GST – whether carrying on an enterprise
• GST and supply of residential apartments – whether the supply of lots by a mortgagee in possession way of lease is an input taxed supply of residential premises – whether the sale of the lots is a taxable supply
• GST and supply of accommodation in services apartments – whether the supply of serviced apartments an input taxed supply – whether supply of additional services to guests also input taxed
• GST and expenses related to selling your home – whether can claim credits for real estate and legal expenses in selling home in order to pay loan used to fund the subdivision and sale of residential land
• GST and entitlement to input tax credits – refinance of motor vehicle – whether entitled to credits when enter into a hire purchase arrangement to re-finance cars

GST-free supplies

• GST and food – whether GST payable on supply of food products within a food court
• GST and counselling services – whether supply of counselling services GST-free pursuant to s 38-10(1)(a) of the GST Act
• GST and food – whether supply of an uncooked and frozen food product to third parties for on-sale to consumers GST-free
• GST and supply of cosmetic treatment – whether the supply of cosmetic treatment, including botox injections, GST-free or taxable
• GST and supplies of food products – whether the sale of fillings to third parties for on-sale to consumers GST-free or taxable
• GST and food additive – whether the supply of a food additive is taxable or GST-free
• GST and food – whether sale of food product not marketed as a prepared meal is GST-free
• GST and dessert – whether the supply of a dessert is GST-free
• GST and services provided to aged or disabled clients – whether the entity is making GST-free supplies under ss 38-30(3) of the GST Act when it provides personal care services under a direct arrangement with an aged or disabled person who receives no funding and also under an arrangement where funding is received
• GST and supply of visa application services – whether the supply of visa application services to a non-resident who is not in Australia when the services are performed GST-free
• GST and food – whether the supply of food product (which can be sold as confectionary or used in making confectionary) is GST free
• GST and treatment of supplies of precious metals – whether supplies of precious metals, after refinement, constitute the first supply in accordance with paragraph 38-385(a) of the GST Act

Other 

• GST and waste management services – whether charges for the supply of an optional green waste recycling service are exempt from GST from 1 July 2012
• GST and importation of precious metals – whether GST payable on the importation of precious metal bullion coins, bars, wafers and rounds
• GST and approval to issue recipient created tax invoices – whether Commissioner will exercise his discretion to allow entity to issue RCTIs for the acquisition of material from different suppliers
• GST and treating a document as a valid tax invoice – whether the Commissioner will exercise his discretion to allow input tax credits without providing valid documents to substantiate the claim
• GST and importation of vehicle into Australia – whether entity entitled to a refund of GST paid on the importation of a vehicle when the vehicle was shortly after exported – vehicle not registered or used in Australia
• GST and precious metals – whether GST payable on investment gold when it is brought into Australia
• GST and non-profit sub-entities – whether entity can treat a branch as a non-profit sub-entity pursuant to Division 63 of the GST Act