As the new GST rules suggest, the operator of the marketplace will now be treated as the supplier of the listed services and therefore be liable for GST. While GST registered suppliers will continue claiming their input deductions, a flat rate credit scheme will be applied to underlying suppliers not registered for GST. This is to reduce compliance costs.

What is the flat rate credit scheme?

The flat rate credit scheme estimates the amount of GST that the underlying supplier would be able to recover as a GST deduction, if they were registered. The flat-rate percentage was determined through analysis of GST return information from suppliers who identified themselves as suppliers of accommodation in holiday homes and from taxi drivers.

This scheme will require marketplace operators to pass on a portion of the consideration charged for the listed services to the underlying supplier.

The proposed amendments would also:

• Require underlying sellers to provide marketplace operators with sufficient information about themselves and their GST registration status
• Provide rules on reversal of the flat rate credit scheme where it is received by those registered for GST
• Allow the commissioner to disclose a persons GST registration status to marketplace operators to ensure effective operation of the scheme.

Proposed new subsection 20(3N) provides that the amount of the input tax deduction to be taken by operators of electronic would be 8.5% of the value of the listed services.

Example:

Jennie provides taxable accommodation through an electronic marketplace where the marketplace operator is responsible for collecting and returning GST on these supplies. She is not registered for GST.

Jennies’ accommodation is booked for $200 plus $30 GST. The marketplace operator collects the GST.

Knowing that Henry is not a registered person, under the proposed amendments, the marketplace operator applies the flat-rate credit scheme and calculates:

• GST of $30 at 15% of the value of the supply, and
• The input tax deduction of $17 (8.5% x 200) for the flat-rate credit at 8.5% of the value of the supply. The marketplace operator would be required to deduct input tax of $17 from the $30 of GST payable to Inland Revenue and pass on the $17 to the underlying supplier as a flat-rate credit.
• The marketplace operator would pay the remaining $13 (30-17) to Inland Revenue, and this would be the net GST collected on the supply of the accommodation

Effective Date

The proposed amendments would take effect on 1 April 2024.

For more information regarding the new GST rules, visit New GST Rules for Electronic Marketplace and Ride Share Companies.

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