Waiver in terms of Section 24(6)(b) of the GST Act
2007 case note – waiving the requirement for a tax invoice - associated parties, time of supply, price undetermined, time of test.
Goods and Services Tax Act 1985
When requested to waive the requirement for a tax invoice under section 24(6)(b) of the GST Act the Commissioner must apply the two limbs of the test at the time he makes his determination. A waiver under section 24(6) cannot operate retrospectively.
The Disputant, a partnership of two trusts purchased livestock from an associated entity, the W partnership. In terms of the deed of sale the settlement date was 31 March 2002 which was also the date possession passed. The sale price was to be determined by a valuation which was only obtained in November 2002. The time of supply was in the GST period ending 31 March 2002. Both parties were registered for GST.
Neither party accounted for the transaction until the W partnership issued a tax invoice on 31 March 2004. On 1 April 004 the Commissioner allowed the transfer of the GST input credit from the Disputant to the W partnership.
The result was that the W partnership had incurred use of money interest from the time of supply period (31 March 2002) until it issued a tax invoice (31 March 2004). On 31 March 2004 the Commissioner refused a request from the Disputant to make a determination in terms of section 24(6)(b) of the GST Act that a tax invoice was not required to be issued by the W partnership. If the Commissioner has allowed the request the Disputant would have been able to claim the input credit in the time of supply period and transfer it to the W partnership at that time, the result being that the W partnership would not have incurred use of money interest.
For unassociated persons section 9(6) deals with the situation where the consideration of goods has not been determined at the time of supply. In terms thereof the supply is deemed to take place when payment is due or received or an invoice is issued, whichever is the earlier. However, that section does not apply to associated persons.
In terms of section 20(2) an input tax credit can only be claimed when a tax invoice is supplied unless one of the exceptions apply, such as, where the Commissioner is satisfied a tax invoice is not required to be issued under section 24(6).
The W partnership had a duty to account for the supply in the period ending 31 March 2002 but was unable to as the price of the livestock had yet to be determined by valuation. It should have delayed the time of supply until the valuation had been received. The fact that the time of supply was in its control is relevant to the exercise of the Commissioner's discretion under section 24(6).
It is also relevant that the when the vendor received the valuation in November 00 it still did not issue a tax invoice, as is the fact that the Disputant never requested one.
On 9 October 2003 the W partnership asked the Commissioner to make a determination under section 24(6)(b) that a tax invoice was not required to be issued. The Commissioner had to apply a two step test. Firstly, he had to be satisfied that there were sufficient records to establish the particulars of the supply, or, that there would be at some future time be sufficient records thereof. Secondly, he had to be satisfied that it would be impractical to require a tax invoice be issued.
The Commissioner is required to determine the two limbs of the test at the time of his determination which was at 31 March 2004. The first limb of the test was satisfied as the valuation was completed in November 2002. In respect of the second limb no reason was given as to why it would be impractical to obtain a tax invoice as at March 2004 or October 2003, when the application was made. The details of the supply were known in November 2002. At the date of the request there was no practical reason why the Disputant could not obtain a tax invoice.
A waiver under section 24(6) cannot operate retrospectively.
Finally, the Commissioner did not breach section 6 or s 6A of the Tax Administration Act 1994 by failing to exercise his discretion in s 24(6) in favour of the Disputant.