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29 Oct 09 Subsidised taxi fares entitled Govt dept to input tax credits - Secretary, DOT (Vic)

The Federal Court (Gordon J) has held that Department of Transport (Victoria) (the DOT), registered under the GST Act 1999, was entitled to input tax credits under s 11-1 of the Act for the GST component of the payments which it made to taxi-cab operators under its “Multi Purpose Taxi Program” (MPTP), the purpose of which was to subsidise the cost of taxi travel incurred by Victorian residents who suffer from a severe and permanent disability (MPTP member). Under the MPTP, the MPTP member paid the taxi-cab operator 50% of the metered fare and the DOT subsequently paid the balance (up to specified maximums).

Initially, the Commissioner argued that the DOT did not acquire anything when it made the payments. This argument was abandoned. Subsequently, the Commissioner submitted that what the DOT acquired was the obligation of the taxi-cab operator to comply with the MPTP and that that obligation, or those rights, were acquired by the DOT when it granted the licence to the taxi-cab operator and not when it made payments to taxi-cab operators under the MPTP.

Her Honour rejected the Commissioner’s arguments in this regard, stating, at para 47:

"The construction of the GST Act contended for by the [Commissioner] ignores the express words of the GST Act, does not give the GST Act a “practical and fair business operation” (see Brady King [2008] FCAFC 118; 168 FCR 558 at [24]- [25]) and would create, or at least has the potential to create, anomalies in the ability to claim input tax credits."

In her Honour's opinion, the "DOT acquires from the taxi-cab operator who carried a MPTP Member a service - the carriage of that person".

Her Honour rejected an alternative argument by the Commissioner that the only taxable supply was the supply from the taxi-cab operator to the MPTP Member, not to the DOT (ie that there was only one acquisition). Her Honour said, at para 59:

"...one set of acts may constitute two or more different supplies of services and may give rise to two or more different acquisitions. Each may be a taxable supply - a supply made for consideration: s 9-5(a). That is what occurred here. The GST consequences though are different for each."

Further arguments by the Commissioner, namely, that there was no contract between any taxi-cab operator and the DOT for the carriage of any particular passenger and, on this basis, that there was no consideration paid and an absence of “some control” by the DOT over the supply, and that there was an analogy with credit and charge card arrangements, were also rejected: Secretary to the Department of Transport (Victoria) v FCT [2009] FCA 1209 (Federal Court, Gordon J, 28 October 2009).

For a copy of the decision, go here

 


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