Issue
Under section 9-70 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) does the entity, a wholesaler that makes a taxable supply of flavoured milk, include the amount of the dairy adjustment levy (DAL) when calculating the goods and services tax (GST) payable on its supply?
Decision
No, the entity does not include the amount of the DAL when calculating the GST payable on its taxable supply of flavoured milk.
Facts
The entity is a wholesaler. The entity makes taxable supplies of flavoured milk to a retailer.
The DAL is a scheme administered by the Commonwealth Department of Agriculture, Fisheries, Forestry - Australia (AFFA), and is levied on all retail sales of liquid dairy products. The levy rate is 11 cents per litre. The retailer is liable for the DAL, but AFFA collects the amount for the DAL through the processor as collection agent for the Commonwealth. The processor adds this amount onto the price they charge the entity, to recoup the amount of the DAL. Similarly, the entity is a collection sub-agent for the Commonwealth in the collection process and adds an amount onto the price they charge the retailer to recoup the amount for the DAL they paid to the processor.
Reasons for Decision
Subdivision 9-C of the GST Act sets out how much GST is payable on a taxable supply. Under section 9-70 of the GST Act, the amount of GST on a taxable supply is calculated as 10% of the value of the taxable supply.
The value of a taxable supply is 10/11th of the price, where the price is the sum of: • so far as the consideration is expressed as an amount of money, the amount (including any GST component), and • where the consideration is not expressed as an amount of money, the GST inclusive market value of that consideration (section 9-75 of the GST Act).
Consideration includes any payment, act or forbearance, in connection with, in response to or for the inducement of a supply of anything (section 9-15 of the GST Act).
The retailer is liable for the DAL, but AFFA collects the amount for the DAL through the processor as collection agent for the Commonwealth. The processor adds this amount onto the price they charge the entity, to recoup the amount of the DAL. Similarly, the entity is a collection sub-agent for the Commonwealth and adds an amount onto the price they charge the retailer to recoup the amount for the DAL they paid to the processor.
The DAL is the retailer's liability and AFFA collects the DAL from the retailer by using the wholesaler and processor as collection agents. As such, when the retailer pays the amount of the DAL that is added onto the entity's price, it is not a payment made in connection with the entity's supply of the flavoured milk, rather it is a payment of the DAL liability to the Commonwealth. Therefore, the amount is not consideration for the entity's supply of the flavoured milk.
Accordingly, the DAL is not included in the price when working out the value of the supply under section 9-70 of the GST Act and as such, the entity does not include the amount of the DAL when calculating the GST payable on its taxable supply of flavoured milk.
Amendment History
Date of amendment Part Comment 22 April 2013 Legislative References Section 9-15 added
Date of amendment | Part | Comment
22 April 2013 | Legislative References | Section 9-15 added