GST Q&A ‘ GST and selling things on behalf of local community members
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Our information centre sells products on commission for local community members. Can you please advise the GST treatment? That is, what happens when the monies go into our trust (we currently don’t include GST)? Also, what happens if the local community member gives us a tax invoice when we make payment to them? The monies are receipted into trust but as far as we are concerned it is not our money.
The GST treatment will depend on the arrangements agreed to between Council and the community members.
You mention that the information centre sells products on commission. If this means that Council sells the products on behalf of the community members (at the prices set by the community members), then it would appear Council is acting as agent to sell the products on behalf of the community members. Any GST on such sales would generally be the responsibility of the community member.
If Council is entitled to receive a commission on such sales, then Council would generally need to raise an invoice (tax invoice) to the community member. For example, if Council sells something for $110 (including GST) for a community member, and Council is entitled to a 10% commission (e.g. $11), then the GST outcomes would be:
- Community member sale $110, and needs to pay $10 GST to the ATO;
- Council receives $11 commission, and pays $1 to the ATO (net $10 to Council);
- As the Community member has paid Council $11, it will have a GST credit entitlement of $1 provided it holds a tax invoice for this commission.
Net position for community member: $90 ($110 less $10 GST, less $11 commission, plus $1 GST credit).
Net position for Council: $10 ($110 cash received, less $99 paid to community member, less $1 GST to ATO).
Disclaimer: Information provided in this article, while correct at time of publishing, is subject to change.