Issue
Is the entity, an electricity supplier, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it surrenders a renewable energy certificate to a government regulator under the Renewable Energy (Electricity) Act 2000?
Decision
No, the entity is not making a taxable supply under section 9-5 of the GST Act when it surrenders a renewable energy certificate to a government regulator under the Renewable Energy (Electricity) Act, as the entity is not making a supply.
Facts
The entity is an electricity supplier that is registered for goods and services tax (GST).
Under the Renewable Energy (Electricity) Act the entity is entitled to surrender its renewable energy certificates to the government regulator. The surrender of the certificates reduces the renewable energy shortfall charge payable by the entity.
When the renewable energy certificate is surrendered, the certificate ceases to be valid under the Renewable Energy (Electricity) Act. The government regulator alters the register of certificates to show that the certificate is no longer valid. Renewable energy certificates have no expiry date and remain valid until surrendered. Once a renewable energy certificate is no longer valid, it cannot be used again.
Reasons for Decision
Section 9-5 of the GST Act sets out the requirements that must be met for an entity to make a taxable supply. The first requirement is that there must be a supply for consideration (paragraph 9-5(a) of the GST Act).
The term 'supply' is a broad concept for GST purposes and is defined in subsection 9-10(1) of the GST Act as 'any form of supply whatsoever'.
The meaning of the term 'supply' is discussed in Goods and Services Tax Ruling GSTR 2001/4. Paragraph 22 of GSTR 2001/4 provides that a supply is essentially 'something which passes from one entity to another'. Further, paragraph 25 of GSTR 2001/4 provides: Subsection 9-10(2) refers to two aspects of a supply; the thing which passes, such as goods, services, a right or obligation; and the means by which it passes, such as its provision, creation, grant, assignment, surrender or release.
Therefore, in the GST Act, the term 'supply' covers not only the subject of the transaction - the thing that passes - but also includes the action by which the thing passes from one entity to another.
When the entity surrenders a renewable energy certificate to the government regulator, the renewable energy certificate merely ceases to be valid under the Renewable Energy (Electricity) Act and the entity's liability to the renewable energy shortfall charge is reduced in that period. The entity is merely exercising its rights under the Renewable Energy (Electricity) Act to apply the renewable energy certificate held by it to reduce its liability to the renewable energy shortfall charge.
The act of surrendering a renewable energy certificate does not involve the passing of something from the entity to the government regulator as there is no passing of ownership of the renewable energy certificate nor is there the surrender of any rights under an agreement by the entity to the government regulator. Accordingly, the entity is not making a supply to the government regulator when it surrenders a renewable energy certificate and the requirement in paragraph 9-5(a) of the GST Act is not met.
The entity is not making a taxable supply under section 9-5 of the GST Act when it surrenders a renewable energy certificate to a government regulator under the Renewable Energy (Electricity) Act.