The AAT has concluded that where an entity, by virtue of its contractual arrangements, paid GST on more than it received for the supply of mobile telephone and tablet accessories, it was not entitled to an input tax credit or a decreasing adjustment.
The taxpayer sold mobile telephone and tablet accessories for one particular telecommunications company (Telco). Under its arrangement with Telco, the taxpayer invoiced a customer for the total price of the accessories it sold, but Telco provided a credit to the customer (the Accessory Repayment Amount) if the customer accepted Telco’s Accessory Repayment Option (ARO). Under the contractual arrangements between the taxpayer and Telco, the taxpayer received a lesser amount (the ARO Payment) from Telco.
The taxpayer contended that since it was liable for GST on the total price of the accessories it sold but it received less than the total price from Telco, the GST rate was effectively more than the statutory rate of 10%. To overcome this “perceived problem”, the taxpayer submitted that it was entitled to input tax credits as there was a “supply” of permission being made on each occasion a customer took advantage of the ARO promotion, the consideration for which was the difference between the Accessory Repayment Amount and the ARO Payment (the Shortfall).
The AAT disagreed. In its view, there was no “supply” and the “practical and commercial reality of the arrangements” was that the Shortfall was the cost to the taxpayer if Telco provided credit to the customer. Accordingly, the taxpayer was not entitled to input tax credits.
The AAT also decided that the taxpayer was not entitled to decreasing adjustments as there was no evidence of any “event” that had the effect of changing the total price of the accessories (the consideration for a supply).
(See: http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/AATA/2022/3994.html)
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