Issue
Is the entity, a grain grower, making a supply that is subject to goods and services tax (GST) under section 7 of the A New Tax System (Goods and Services Tax Transition) Act 1999 (Transition Act), when it delivers grain to a cooperative prior to 1 July 2000 but does not receive payment until on or after 1 July 2000?
Decision
No, the entity is not making a supply that is subject to GST under section 7 of the Transition Act, when it delivers grain to a cooperative before 1 July 2000 but does not receive payment until on or after 1 July 2000.
Facts
The entity is a grain grower. The entity delivers the grain, as it is harvested, to a cooperative in order for the grain to be mixed with that of other suppliers, under an arrangement known as a 'grain pool'.
The entity delivers the grain to the cooperative before 1 July 2000. Title to the grain passes from the entity to the cooperative when the cooperative accepts delivery at the silo.
The cooperative pays the entity for the grain on or after 1 July 2000.
Reasons for Decision
Under section 7 of the Transition Act, GST is only payable on a supply to the extent that it is made on or after 1 July 2000.
Firstly, it must be determined if the entity is making a 'supply'. Subsection 5(2) of the Transition Act states the expressions used in the Transition Act have the same meaning as in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). Therefore, it is appropriate to refer to section 9-10 of the GST Act which sets out the meaning of the term 'supply'.
Paragraph 9-10(2)(a) of the GST Act states that a supply includes a supply of goods. The entity is making a supply of grain, which is the supply of goods.
Next, it must be determined whether the supply was made before or after 1 July 2000. Section 6 of the Transition Act sets out specific timing rules for determining when a supply is made. In particular, paragraph 6(2)(a) of the Transition Act states that a supply of goods is made when the goods are 'removed'.
The term 'removed' is not defined in the Transition Act and is therefore given its ordinary meaning. In relation to goods, the Macquarie Dictionary (1997) defines 'remove' as 'to move from a place or position; take away; take off' or 'to move or shift to another place or position' or 'to take, withdraw, or separate (from)'. This implies a physical removal of goods from the supplier's possession.
The entity delivers the grain to the cooperative. Further, title in the grain passes from the entity to the cooperative on acceptance of delivery at the silo. Consequently, the grain is removed from the entity's possession. As the delivery of the grain is made before 1 July 2000, the supply is taken to be made before 1 July 2000. It does not matter that the entity receives payment after this date.
Therefore, the entity is not making a supply that is subject to GST under section 7 of the Transition Act, where it delivers grain to cooperative before 1 July 2000 but does not receive payment until on or after 1 July 2000.