GST and validity of an arbitrated offer in respect of a long-term non-reviewable contract

Can the entity, a supplier under a long-term non-reviewable contract, make an 'arbitrated offer' in accordance with section 15J of the A New Tax System (Goods and Services Tax Transition) Act 1999 (GST Transition Act) if the assessor's determination of an appropriate price change is not made within 28 days of the end of the initial offer period?

No, the entity cannot make an arbitrated offer in accordance with section 15J of the GST Transition Act if the assessor's determination of an appropriate price change is not made within 28 days of the end of the initial offer period.

The entity is a supplier under a long-term non-reviewable contract. The entity wishes to change the price for the supply it makes under the contract to account for the goods and services tax (GST) payable from 1 July 2005. The entity and the recipient of the supply are unable to agree on a price change. The entity decides to use the arbitration process provided by Subdivision C of Division 2 of the GST Transition Act.

In accordance with section 15K of the GST Transition Act, the entity makes an initial offer to the recipient to change the price of the supply. The recipient fails to accept the offer. In accordance with section 15L of the GST Transition Act, the entity then applies to an arbitrator for appointment of an assessor to determine an appropriate price change.

The assessor does not make the price determination within the prescribed 28 day period as required under paragraph 15L(1)(d) of the GST Transition Act.

Section 15J of the GST Transition Act provides that a final offer to change the consideration for supplies, that are made on or after 1 July 2005 and that are specifically identified by an agreement of a kind referred to in subsection 13(1) of the GST Transition Act, is an arbitrated offer if: • the supplier has, in accordance with section 15K of the GST Transition Act, made an initial offer to the recipient of the supplies to change the consideration • change to the consideration has been arbitrated in accordance with section 15L of the GST Transition Act, and • the supplier makes the final offer in accordance with section 15M of the GST Transition Act.

The arbitration process in section 15L of the GST Transition Act is a prescribed arbitration process. Paragraph 15L(1)(d) of the GST Transition Act specifically provides that the assessor's determination of an appropriate change to the consideration 'must be made within 28 days of the end of the offer period ...'

As the assessor's determination was not made within the prescribed 28 day period, the entity has not met the requirements of section 15L of the GST Transition Act. Therefore the entity cannot make an 'arbitrated offer' in accordance with section 15J of the GST Transition Act. Note 1: There is nothing in Subdivision C of Division 2 of the GST Transition Act that expressly prohibits the restarting of the arbitration process. Accordingly, the entity could make a further initial offer to the recipient and start a new arbitration process under section 15L of GST Transition Act, if the further initial offer period lapses without acceptance, or the recipient rejects the further initial offer made. Note 2: The 'offer period' specified in paragraph 15L(1)(d) of the GST Transition Act is the initial offer period. Therefore, the assessor's determination must be made within 28 days of the end of the offer period specified in the initial offer made under section 15K of the GST Transition Act. This is so even if the recipient rejects the initial offer at a time other than the end of the offer period specified.