GST and attribution of GST payable on a packaged supply of advertising services

Is the entity, a supplier of advertising services, able to attribute all of the goods and services tax (GST) payable on a supply in accordance with Division 156 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes a supply of a packaged advertising service consisting of two parts, only one of which is supplied on a progressive or periodic basis?

No, the entity is not able to attribute all of the GST payable on the supply in accordance with Division 156 of the GST Act when it makes a supply of packaged advertising services consisting of two parts, only one of which is supplied on a progressive or periodic basis. However, it can attribute GST payable on the part that is supplied on a progressive or periodic basis in accordance with Division 156 of the GST Act.

The entity is a supplier of advertising services. The entity is making a taxable supply of packaged advertising services. The packaged supply of advertising services consists of continuous online advertising over a particular period and a one-off print advertisement.

The entity receives one payment each month for its supply of the packaged advertising service. The invoice issued to the client by the entity does not split the payment into separate parts to reflect the different kinds of advertising services supplied. However, the entity is able to calculate the value of each separate part of the packaged supply.

The entity does not account for GST on a cash basis.

In some cases, the entity supplies online advertising services and print advertisements separately. Where a customer pays for a single supply of online advertising services on a progressive or periodic basis, this single supply is a supply to which Division 156 of the GST Act applies. A single supply of a one-off print advertisement is not a supply to which Division 156 of the GST Act applies.

The entity is registered for GST.

Division 156 of the GST Act sets out special rules relating to supplies and acquisitions made on a progressive or periodic basis.

Under subsection 156-5(1) of the GST Act, the GST payable by an entity on a taxable supply that is made: • for a period or on a progressive basis; and • for consideration that is to be provided on a progressive or periodic basis;

is attributable, in accordance with section 29-5 of the GST Act, as if each progressive or periodic component of the supply were a separate supply.

The entity receives one payment each month for its supply of the packaged advertising services. Therefore, the consideration for the taxable supply is being provided on a periodic basis. However, the supply consists of two parts, one of which is a supply made on a progressive or periodic basis (ie the online advertising services) and the other which is not made on a progressive or periodic basis (ie the one-off print advertisement). As such, it needs to be determined whether the entity is making either: • a single supply, all of which is made on a progressive or periodic basis; or • a supply which consists of separate parts, only one of which is made on a progressive or periodic basis, that need to be treated differently for GST attribution purposes.

In determining whether a supply has separately identifiable parts, it is necessary to objectively assess the characteristics of the supply.

In relation to whether various parts of a supply are separately identifiable, Millet LJ stated in Customs and Excise Commissioners v Wellington Private Hospital Ltd (1997) BVC 251 at 266 that: 'The proper inquiry is whether one element of the transaction is so dominated by another element as to lose any separate identity as a supply for fiscal purposes, leaving the latter, the dominant element of the transaction, as the only supply. If the elements of the transaction are not in this relationship with each other, each remains as a supply in its own right with its own separate fiscal consequences.'

Millet LJ (at p 266) also found that courts need to ask whether one part is connected with the other, or whether the two parts are 'physically and economically dissociable'.

In this case, the separate parts of the packaged advertising services can be supplied on their own, and in fact, in some cases are. Therefore, neither part of the packaged advertising service is so dominated by the other part as to lose any separate identity it may have. Furthermore, the online advertising is physically separable from the print advertising, and as the entity can value each part, the separate parts are also economically separable.

Therefore, each part of the supply of the packaged advertising service remains a supply in its own right and each part must be treated according to whether it is a supply made for a period or on a progressive basis for the purposes of Division 156 of the GST Act.

The online advertising part of the packaged supply is a supply to which Division 156 of the GST Act applies. As such, the GST payable on the consideration which can be attributed to the supply of online services must be attributed in accordance with Division 156 of the GST Act. As a one-off print advertisement is not supplied for a period or on a progressive basis, Division 156 of the GST Act does not apply to this part of the advertising package. Therefore, the GST payable on the consideration that relates to the print advertising must be attributed in accordance with Division 29 of the GST Act.

The entity is not able to attribute all of the GST payable on the supply in accordance with Division 156 of the GST Act when it makes a supply of packaged advertising services consisting of two parts, only one of which is supplied for a period or on a progressive basis.