GST and adjustment event - case deal rebate

Does the entity, a manufacturer, have an adjustment under section 19-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it provides a case deal rebate to a wholesaler?

Yes, the entity has an adjustment under section 19-40 of the GST Act, when it provides a case deal rebate to a wholesaler.

The entity is a manufacturer. The entity supplies goods to a wholesaler who distributes the goods to various retailers. The entity is registered for goods and services tax (GST) and the supply of the goods to the wholesaler is a taxable supply under section 9-5 of the GST Act. The entity has attributed the GST on the supply of the goods to the wholesaler in an earlier tax period.

In the current tax period, the entity enters into an arrangement under which the wholesaler sells the goods to the various retailers at a reduced price during a specified period of time and claims a case deal rebate from the entity.

The case deal rebate is a price reduction off a carton of goods. The rebate claim is calculated by multiplying the number of cartons sold by the wholesaler to the retailers by a certain amount.

Section 19-40 of the GST Act provides that an entity has an adjustment for a supply for which it is liable to pay GST if: • in relation to the supply, one or more adjustment events occur during a tax period; • GST on the supply was attributable to an earlier tax period; and • as a result of those adjustment events, the previously attributed GST amount for the supply no longer reflects the amount of GST on the supply, taking into account of any change in circumstances that has given rise to the adjustment event(s).

Under paragraph 19-10(1)(b) of the GST Act, an event that has the effect of changing the consideration for a supply or an acquisition is an adjustment event. History note: Paragraph amended on 3 June 2003 to delete 'of' after the word 'changing' in the last sentence of the paragraph.

In this case, the entity enters into an arrangement under which the wholesaler sells the goods to the various retailers at a reduced price during a specified period of time and claims a case deal rebate from the entity. The case deal rebate is a price reduction off a carton of goods. The effect of the plan is to change the consideration for the supply of the goods that the entity supplied to the wholesaler. As such, the payment to the wholesaler is an adjustment event under paragraph 19-10(1)(b) of the GST Act. History note: Paragraph amended on 3 June 2003 to delete 'of the' after the word 'payment' in the last sentence of the paragraph.

The entity has attributed the GST on the supply of the goods to the wholesaler in an earlier tax period and as a result of the adjustment event, the previously attributed GST amount for the supply no longer reflects the amount of GST on the supply. Accordingly, the remaining requirements in section 19-40 of the GST Act are also met.

Therefore, the entity has an adjustment under section 19-40 of the GST Act when it provides a case deal rebate to a wholesaler. [Note: The provision payment of the rebate by the entity to the wholesaler is a change in the consideration for the supply made by the entity to the wholesaler and is an adjustment event under paragraph 19-10(1)(b) of the GST Act. The case deal rebate to the wholesaler is not consideration for a separate supply made by the wholesaler to the entity.]