ATO ID 2004/948: GST and supply of goods imported by a recipient where the non-resident supplier subsequently installs the goods in Australia under a separate contract
Date of decision: 8 June 2004
Business line: Indirect Tax

Issue
Is the entity, a non-resident, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies goods, to an Australian customer, that it subsequently installs in Australia under a separate contract?

Decision
Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies goods, to an Australian customer, that it subsequently installs in Australia under a separate contract.

Facts
The entity is a non-resident that is registered for goods and services tax (GST). Under a sale of goods contract, the entity sold goods to an Australian customer for consideration. The supply of the goods is not GST-free or input taxed. The sale was on Delivered Ex Quay (DEQ) terms, where the entity was responsible for discharging the goods at the quay (port of destination) and the customer was responsible for clearing the goods for importation and paying for all formalities, duties, taxes and other charges upon importation. At a later date, both parties entered into a separate contract where the entity agreed to install the goods in Australia for the customer. This separate contract was entered into before the goods were imported into Australia.

Reasons for decision
Summary: Under section 9-5 of the GST Act, an entity makes a taxable supply if: However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. The entity sold goods to a customer, for consideration, in the course of an enterprise that it carries on and it is registered for GST. Furthermore, the supply is neither GST-free nor input taxed. Therefore, if the entity's supply is connected with Australia, it will be a taxable supply. Subsection 9-25(3) of the GST Act provides that a supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either: Paragraph 73 of the Goods and Services Tax Ruling GSTR 2003/15 provides that when a supplier causes the goods to be brought to Australia, the supplier does not import the goods into Australia where the customs formalities for the importation of the goods are completed by the entity that acquires the goods from the supplier. The goods are sold by the entity on DEQ terms. The DEQ terms requires the customer to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import. As such, the entity does not import the goods into Australia and paragraph 9-25(3)(a) of the GST Act is not satisfied. However, under paragraph 9-25(3)(b) of the GST Act, a supply of goods being brought to Australia is connected with Australia if the supplier installs or assembles the goods in Australia. This provision applies broadly to circumstances where a supply of goods to Australia involves the supplier installing or assembling the goods in Australia and does not only apply to the supply of 'installed goods'. This ensures that the GST treatment of goods being brought to Australia is identical regardless of whether installed goods are supplied or the parties split the supply of the goods and the supply of installation services into separate contracts. At a later date and before the goods were imported into Australia, both parties entered into a separate contract where the entity agreed to install the goods in Australia. Notwithstanding that the parties enter into separate contracts, paragraph 9-25(3)(b) of the GST Act applies because the entity agrees to install, in Australia, the goods that it supplied and that were brought to Australia. As such, the supply of the goods is connected with Australia. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies goods, to an Australian customer, that it subsequently installs in Australia under a separate contract.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 section 9-25 subsection 9-25(3) paragraph 9-25(3)(a) paragraph 9-25(3)(b)
Subject references: Goods and services tax GST international services Connected with Australia GST supplies & acquisitions GST supply Taxable supply