GST and the supply and fitting of disc brake pads to an eligible disabled person's car

Is the entity, a motor vehicle repairer, making a mixed supply that is partly a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and partly a GST-free supply under subsection 38-510(4) of the GST Act, when it supplies a set of disc brake pads to an eligible disabled person and fits the disc brake pads to the eligible disabled person's car?

Yes, the entity is making a mixed supply that is partly a taxable supply under section 9-5 of the GST Act and partly a GST-free supply under subsection 38-510(4) of the GST Act. The fitting of the set of disc brake pads, being the supply of labour, is a taxable supply. The supply of the set of disc brake pads is a GST-free supply.

The entity is a motor vehicle repairer. The entity supplies a set of disc brake pads for the car of an eligible disabled person. This supply includes the supply of the disc brake pads to the eligible disabled person and the fitting of the disc brake pads to the eligible disabled person's car. The fitting of the disc brake pads requires a substantial amount of labour costs and time.

The eligible disabled person meets the requirements of paragraphs 38-510(1)(a) and 38-510(1)(b) of the GST Act.

The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.

Section 9-5 of the GST Act provides that an entity makes a taxable supply when the requirements in that section are met. However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.

Under subsection 38-510(4) of the GST Act, a supply of car parts that are for a car for an individual who meets the requirements in paragraphs 38-510(1)(a) and 38-510(1)(b) of the GST Act, is GST free.

The entity supplies a set of disc brake pads for the eligible disabled person's car. The disabled person meets the requirements of paragraphs 38-510(1)(a) and 38-510(1)(b) of the GST Act. The disc brake pads are car parts, and therefore, the supply of the disc brake pads is GST-free under subsection 38-510(4) of the GST Act. However, although the supply of the set of disc brake pads by itself is a GST-free supply, it needs to be determined whether the fitting of the disc brake pads forms part of the supply of the disc brake pads or is a separate supply.

Goods and Services Tax Ruling GSTR 2001/8 provides guidance on composite and mixed supplies by describing the characteristics of supplies that contain taxable and non-taxable parts (mixed supplies) and the characteristics of supplies that appear to have more than one part but are essentially supplies of one thing (composite supplies).

Paragraphs 16 and 17 of GSTR 2001/8 state: 16. A mixed supply is a supply that has to be separated or unbundled as it contains separately identifiable taxable and non-taxable parts that need to be individually recognised... 17. If you make a supply that contains a dominant part and the supply includes something that is integral, ancillary or incidental to that part, then the supply is composite. You treat a composite supply as a supply of a single thing...

Whether a particular part of a supply is integral, ancillary or incidental in relation to the whole supply is a question of fact and degree.

Each part of the entity's supply has significant value, as a substantial amount of labour costs and time are needed to fit the disc brake pads to the car. Each part is significant enough in its own right to be regarded as separately identifiable parts and not as integral, ancillary nor incidental to each other. As such, the supply of labour is separately identifiable to the supply of the set of disc brake pads and its GST status must be considered separately to the supply of the disc brake pads. The supply of labour is not covered by subsection 38-510(4) of the GST Act or any other provision in Division 38 of the GST Act or Division 40 of the GST Act. The entity is registered for GST and the supply of labour satisfies the other positive limbs of section 9-5 of the GST Act. Therefore, the entity's supply of labour is a taxable supply.

As such, the entity is making a mixed supply that is partly a taxable supply under section 9-5 of the GST Act and partly a GST-free supply under subsection 38-510(4) of the GST Act. Note 1: Where the supply is a mixed supply, the GST liability is only calculated on the taxable portion. The value of the mixed supply that represents the taxable supply is calculated in accordance with the following formula: (Price of the supply * 10) / (10 + Taxable proportion)

where: 'taxable proportion' is the proportion of the value of the actual supply that represents the value of the taxable supply (expressed as a number between 0 and 1) (see subsection 9-80(2) of the GST Act). Note 2: This decision also applies to the fitting of disc brake pads to a disabled veteran's car where the requirements of section 38-505 of the GST Act are met.