GST and servicing an eligible disabled person's car

Is the entity, a motor vehicle repairer, making a GST-free supply under subsection 38-510(4) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it performs a standard service on the car of an eligible disabled person and a minor car part is supplied as part of the service?

No, the entity is not making a GST-free supply under subsection 38-510(4) of the GST Act when it performs a standard service on the car of an eligible disabled person and a minor car part is supplied as part of the service. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is a motor vehicle repairer. The entity performs a standard service on an eligible disabled person's car. As part of the service, the entity supplies a minor car part such as replacing a radiator hose. The entity's supply of the standard service to the car requires a substantial amount of labour time and cost.

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.

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 performs a standard service to the car of an eligible disabled person. The supply of a service is the supply of labour. The supply of labour is not the supply of car parts and therefore, is not covered by subsection 38-510(4) 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. Furthermore, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity's supply of labour is a taxable supply under section 9-5 of the GST Act.

The entity also supplies a minor car part, such as replacing a radiator hose, as part of the service. As the car is for an eligible disabled person that meets the requirements of paragraphs 38-510(1)(a) and 38-510(1)(b) of the GST Act, the supply of the car part by itself would be a GST-free supply under subsection 38-510(4) of the GST Act. However, it needs to be determined whether the supply of the car part forms part of the supply of labour and is a taxable supply.

Goods and Services Tax Ruling GSTR 2001/8 outlines the characteristics of supplies that appear to have more than one part but are essentially supplies of one thing. These supplies are referred to as composite supplies. In particular, paragraph 17 of GSTR 2001/8 states:

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.

The entity's supply of labour to perform the car service represents the dominant component of the value of its supply. The supply of minor car parts is merely integral, ancillary or incidental to the supply of the labour to perform the car service. Accordingly, the entity's supply is a composite supply and therefore is treated as a supply of one thing being a supply of labour to perform the car service.

Therefore, the entity is not making a GST-free supply under subsection 38-510(4) of the GST Act, when it performs a standard service on the car of an eligible disabled person and a minor car part is supplied as part of the service. The entity is making a taxable supply under section 9-5 of the GST Act. Note: This decision also applies to the servicing of a disabled veteran's car where the requirements of section 38-505 of the GST Act are met.