Is the payment received by the Entity from the Members for the use of water at each apartment consideration for a GST-free supply of water under section 38-285 of the A New Tax System (Goods and Services Tax Act) 1999 (GST Act) and therefore not subject to GST?
Yes, the payment received by the Entity from the Members for the use of water at each apartment is consideration for a GST-free supply of water under section 38-285 of the GST Act by the Entity and is therefore not subject to GST. This ruling applies for the following periods : 1 MM 2024 to 30 MM 2028 The scheme commenced on: 1 MM 2024
The Entity manages a complex comprising a number of Lots. The Entity is registered for GST. The Entity procures water for supply to the Members. The Entity then on-charges the Members for the use of water by each Lot. There is a Management Agreement between a Manager and the Entity. Under the Management Agreement, the Manager as an agent on behalf of the Entity procures water supply for the Members. Water usage to the Lots is metered through a single water meter on the exterior of the property. Water is supplied to the property by a Water Provider. An account is issued to the Entity who is liable to pay for all water consumed on the property. The Water Provider reads the external main meter and issues an account to the Manager. This is for all water consumed on the property. The Manager receives invoices as an agent on behalf of the Entity. The Manager pays for the total consumption of water from the Entity's bank account which the Manager operates on behalf of the Entity. No GST is charged on the supply of water.
Water supplied by the Water Provider to the Entity is on-supplied to each Member whose Lots are individually fitted with both cold and hot water sub-meters to record consumption. The Entity then seeks payment from the Members for the use of water at each Lot by have the Manager seek such payment on their behalf. The Manager engages a third-party utility company to provide periodic sub-meter readings to determine the specific amount of water consumed at each Lot. The Entity invoices the Members for the amount of water consumed based on the sub-meter reading at the same rate that was charged to it by the Water Provider. The Entity bears the commercial risk where a Member defaults on payment for the water. The Manager charges a service fee for administrative services provided. This is for the Manager's time in raising an invoice to each Member.
A New Tax System (Goods and Services Tax) Act 1999 section 9-5 A New Tax System (Goods and Services Tax) Act 1999 section 9-10 A New Tax System (Goods and Services Tax) Act 1999 section 9-15 A New Tax System (Goods and Services Tax) Act 1999 section 38-285 Reasons for decision Under section 38-285 of the A New Tax System (Goods and Service Tax) Act (GST Act), a supply of water is GST-free. However, a supply of water is not GST-free under Subdivision 38-I of the GST Act if it is supplied in a container, or transferred into a container, that has a capacity of less than 100 litres. Goods and Services Tax Ruling GSTR 2000/25 Goods and services tax: GST-free supplies of water, sewerage and sewerage-like services, storm water draining services and emptying of a septic tank explains the Commissio