Private ruling: GST and supply of licence
Published: March 2012

Ruling: Q1: Is your supply of licence to resident entities in Australia subject to goods and services tax (GST)? Is your supply of licence to non-resident entities subject to GST? | A1: Yes, your supply of licence to resident entities in Australia is subject to GST. No, your supply of licence to non-resident entities is not subject to GST

Relevant facts and circumstances: You are registered for GST. You operate a website where you publish educational materials in the area of health (the licensed materials). The licensed materials are sourced from professionals and experts in their fields around the world. They are published in your website in the audio, video and portable document file (pdf) formats. By way of subscription, you supply licences to universities, hospitals, private practices and other private educational institutions (the licensees). The licence grants a licensee the non-exclusive and non-transferable right to give staff members or students of the licensee (authorised users) access to your website for streaming and/or downloading the licensed materials. The authorised users do not have to subscribe to your website separately. The licensee may also allow persons who are not authorised users (walk-in users) to access your website from designated computer terminals within the licensee's premises. You charge an annual fee for the subscription. There are subscribers to your website that are non-resident entities for Australian tax purposes. They include educational institutions around the world as well as professional individuals and private practices which are not registered or required to be registered for GST and are not in Australia at the time of supply. Certain licensees require the facility to build and run their own short courses using materials provided by them as well as the licensed materials available from your website. You provide this facility for the licensees to select and customise 'packages' of videos, sometimes accompanied by examinations (multiple choice and short answers) that can be taken online by users via your portal. The 'packages' are made available to students, staff members and other designated users for training and professional development purposes. You do not deliver courses in your own right.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5, | A New Tax System (Goods and Services Tax) Act 1999 section 38-85, | A New Tax System (Goods and Services Tax) Act 1999 section 38-95, | A New Tax System (Goods and Services Tax) Act 1999 section 38-190 and | A New Tax System (Goods and Services Tax) Act 1999 section195-1.

Reasons for decision: Summary: GST is payable on taxable supplies. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states: 'You make a taxable supply if: · you make the supply for *consideration; and · the supply is made in the course or furtherance of an *enterprise that you *carry on; and · the supply is *connected with Australia; and · you are *registered, or *required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.' (*denotes a term defined in section 195-1 of the GST Act). Based on the information that you provided, we consider your supply to be a supply of a licence granting the subscribers a right to allow authorised users and walk-in users access to your website. You supply the licence by subscription for which you charged an annual fee. You make the supply of licence for consideration and in the course of carrying on your enterprise. The supply is connected with Australia. Furthermore, you are registered for GST. As such, all the requirements in paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act are satisfied. Therefore, your supply of licence to subscribers is a taxable supply unless the supply is GST-free or input taxed. Your supply of licence is not input taxed under any provision of the GST Act; thus, we will determine whether the supply is GST-free. | Detailed Reasoning - Education courses: In your ruling application, you advised that you consider the nature of your supply as educational and therefore should be GST-free. Under paragraph 38-85(a) of the GST Act, a supply of an education course is GST-free. An 'education course' is defined in section 195-1 of the GST Act to include courses such as tertiary courses, professional or trade courses, and adult and community education courses. For a course to be considered an education course, certain criteria must be met. For instance, the course must be supplied by a higher education institution or a registered training organisation. Although you provide facility for subscribers to build and run courses through your portal, you advised that you do not deliver courses in your own right. As such, the supply that you make to the subscribers is not a supply of an education course. | Detailed Reasoning - Course materials: Section 38-95 of the GST Act provides that a supply of course materials for a subject undertaken in an education course is GST-free. The GST Act defines 'course materials', in relation to an education course, to mean materials provided by the entity supplying the course that are necessarily consumed or transformed by the students undertaking the course for the purposes of the course. The licensed materials that you publish in your website may be educational; however, they are not materials consumed or transformed by the subscribers or the authorised users. Furthermore, you do not supply an education course for which the licensed materials are used. Therefore, the supply that you make to the subscribers is not a supply of course materials. | Detailed Reasoning - Supplies for consumption outside Australia: The supply of things, other than goods or real property, for consumption outside Australia is GST-free if the supply is covered by any of the items in the table in subsection 38-190(1) of the GST Act. As your supply of licence is a supply of rights, Item 4 in the table (Item 4) is relevant. Under Item 4, a supply that is made in relation to rights is GST-free if: '(a) the rights are for use outside Australia; or (b) the supply is to an entity that is not an Australian resident and is outside Australia when the thing supplied is done.' To be covered by paragraph (a) of Item 4, it must be established that the intention is that the rights will be used outside Australia. The rights granted under the license in this case are rights to give access primarily to the staff members or students of the licensees; therefore, the rights are intended to be used where the licensees are located unless there is evidence to the contrary. For licensees that are residents of Australia, the rights granted under the licence are not for use outside Australia. Thus, paragraph (a) of Item 4 does not apply and the supply of the licence to residents in Australia is not GST-free under subsection 38-190(1) of the GST Act. For licensees that are not residents of Australia, the rights granted under the licence are for use outside Australia. Furthermore, you advised that the non-residents are not registered or required to be registered for GST and are not in Australia when the supply is done. Thus, both paragraphs (a) and (b) of Item 4 are satisfied. The supply of the licence to non-residents is GST-free under subsection 38-190(1) of the GST Act.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.