Entity A is the Principal and Entity B is the agent. Entity A provides entity B an advance to provide the services to Entity A's members. The advance is recorded by entity B as a liability and no tax invoice is issued. Entity A pays Entity B a fixed commission for the year for providing the services and Entity B issues a tax invoice for the commission received. Aside from the commission, Entity B does not earn any other income in providing the services, no additional costs to Entity A's members.
In the process of providing the services to the members of Entity A, Entity B engaged third-party suppliers to provide these services. Third-party suppliers issued tax invoices addressed to Entity B for these services. Entity B claims the GST input for these services in its BAS. At the end of the year, a cash settlement between Entity A and Entity B is done to settle the GST balance. No tax invoice is issued but adjustment is done through the liability account for the advance received at the beginning of the year.
Moving forward, what are the options and requirements for entity B to be allowed not to include in its BAS returns the GST related to transactions done on behalf of Entity A?
Is Entity B allowed to have the third-party suppliers to issue the tax invoices directly to Entity A and have Entity A report the GST on its BAS? What should happen to the beginning balance of GST credits?
Are there any other actions that Entity A and B should be doing instead of the current arrangement described above?
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