GST relief that operators of electronic marketplaces and listing intermediaries should be aware of
Amendment Paper No 20 has been widely discussed in the tax world since being issued on 14 March 2024, with its draft legislation covering some highly anticipated tax topics.
The Paper is an amendment of the Taxation (Annual Rates for 2023-24, Multinational Tax and Remedial Matters) Bill (“the Bill”). The Bill is due to return to the House for its second reading on 19 March 2024.
Some welcome relief provided for in Amendment Paper No 20 relates to the controversial GST on listed services. More specifically, the proposed amendment aims to exclude contracts for short-stay and visitor accommodation entered into before 1 April 2024 from the listed services provisions that come into effect on 1 April 2024.
Proposed relief for listed services
The amendment proposed in Amendment Paper No 20 introduces a transitional rule to avoid unintended consequences for accommodation booked before 1 April 2024 that would result in the host being out of pocket.
The general time of supply rule in the Goods and Services Tax Act 1985 (“GST Act 1985”) determines that a supply takes place on the earlier of the date the invoice is issued or payment is received. This could result in adverse GST consequences for advance accommodation bookings that were confirmed prior to 1 April 2024 on the assumption that GST would not apply. In the absence of a transitional rule, the supply of the accommodation from 1 April 2024 onwards would be subject to GST even though the price of the accommodation was not set with GST in mind.
The marketplace operators and listing intermediaries would have the option to apply the transitional rule if all of the following conditions are met:
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The supply is made through an electronic marketplace.
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The supply is made under a contract entered into before 1 April 2024, being the application date of the new listed services rules.
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In the absence of the transitional rule, the supply would have been subject to GST under the electronic marketplace provisions.
Opting into the transitional rule
Opting into the transitional rule means that the GST provisions under the electronic marketplace provisions (including the flat-rate credit) would not apply to the booking. Any GST liability for the supply would remain with the underlying supplier of the accommodation if the underlying supplier were registered for GST.
The main requirements for opting into the transitional rule to be aware of is that the underlying supplier would have to:
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notify the marketplace operator or listing intermediary within a reasonable period of the decision to apply the transitional rule; and
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provide sufficient information so that the marketplace operator or listing intermediary can correctly account for GST on the supply.
Inland Revenue does not have to be notified. However, in line with the record keeping rules in the GST Act 1985, evidence of the choice to opt in must be retained for a minimum period of seven years.
If the underlying supplier is not a registered person, the same information still needs to be provided to the listing intermediary to avoid GST being levied on the supply and input tax being deducted for the flat rate credit.
We’re here to help
The GST rules applicable to electronic marketplaces are complicated. For further assistance, reach out to your local BDO adviser.
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Article by Rozelle van Schaik, Senior Tax Manager, BDO Auckland.