The Federal Court has held that supplies provided by a taxpayer, an Australian travel agent, to non-resident travel agents were subject to GST, as they did not fall within the scope of s38-190 of the GST Act, because the supplies were ultimately provided to non-resident tourists who travelled to Australia. However, the Court held that a margin fee charged by the taxpayer was GST-free.
The taxpayer was an Australian travel agent that provided supplies to non-resident travel agents in relation to products (ie hotel rooms, airport transfers etc). It would enter into contracts with relevant Australian providers, and tax invoices would then be issued to non-resident agents for the total amount the taxpayer would be required to pay the Australian providers plus a margin (which was calculated as a percentage of the amounts the taxpayer was liable to pay). Those products would then be provided to non-resident tourists upon their arrival in Australia.
The taxpayer sought a refund of overpaid GST for the period 1 April 2005 to 30 June 2007 as it contended that the supply to non-resident travel agents was only the provision of booking/arranging services which would be GST-free. In the alternative the taxpayer also argued that the margin it provided for the booking/arranging services was GST-free as it was separate. Broadly, the Commissioner argued that the taxpayer was supplying a contractual right and that the margin was not a separate supply.
The Federal Court said that an analysis of the relationship between the taxpayer and the non-resident travel agents made it clear that the taxpayer supplied a contractual right or promise to the non-resident agents that the products would be provided to the non-resident tourists. It held the supply of the promise that the products would be provided did not fall within the scope of s 38-190 and was accordingly subject to GST. However, the Court held that the margin was a service “sought for its own sake” and accordingly was GST-free pursuant to item 2 of s 38-190.
In addition, the Federal Court also affirmed that, for tax periods between 1 April 2005 and 30 June 2008, Sch 1 of s 106-65 of the TAA conferred discretion on the Commissioner to refuse to refund GST. [Having determined that there was an amount that has been overpaid on the GST-free supplies, and that s105-65 does give the Commissioner a discretion not to refund the amount, the matter was remitted back to the Commissioner for his determination.]
(ATS Pacific Pty Ltd v FCT [2013] FCA 341, Federal Court, Bennett J, 15 April 2013.)
[LTN 71, 16/4/13]