The IRD recently released a draft Interpretation Statement for consultation entitled “Goods and Services Tax – Single Supply or Multiple Supplies”.
The IS sets out how to identify situations where a supply is deemed to be one supply or if it consists of multiple supplies. This is an important determination in cases where there are multiple supplies with different GST treatments (i.e. zero rated, exempt or standard rated).
The IS clarifies that, as always, the first place to start is looking at the contract and considering the legal form of the arrangement.
Secondly, it is important to consider the relationship between the different elements of what is supplied. In doing this, consideration must be had to whether one element of a transaction is merely ancillary or incidental, or is an integral part of the transaction.
Thirdly, consideration needs to be had as to whether there are any special rules in the Act that modify the conclusions reached.
The IS sets out that if there is one composite supply, the GST treatment of that supply will follow the dominant element of the transaction. If there is no dominant element, the GST treatment will be determined by the dominant purpose of the transaction from an economic perspective. If there are multiple supplies, the relevant provisions of the GST Act are applied to each supply.
The IS contains further detail and various examples of how to identify multiple supplies and how the GST treatment applies in some cases.
Submissions can be made on this and close on 29 July 2016.