Private ruling: GST and supply of services to non-resident
Published: November 2013

Ruling: Q1: Is the entity making a taxable supply to the non-resident when it provides investigation services in relation to individuals living and/or working overseas? | A1: No, the entity is not making a taxable supply to the non-resident when it provides investigation services in relation to individuals living and/or working overseas.

Relevant facts and circumstances: The entity is registered for goods and services tax (GST). The entity entered into an arrangement with the non-resident to provide investigation services. Under the arrangement, the non-resident will send a request for the service electronically. The entity will conduct the investigation and deliver the results to the non-resident electronically. The entity will charge the non-resident a fee for the check. The agreement does not require the entity to provide its services to another entity, including individuals in Australia. The non-resident does not have a presence in Australia in relation to the supply of services by the entity. The non-resident is not registered or required to be registered for GST.

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

Reasons for decision: Summary: GST is payable on a taxable supply. Section 9-5 of the A New Tax System (Goods and Services tax) Act 1999 (GST Act) states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course of furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with Australia; and (d) 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 under section 195-1 of the GST Act) The supply of services by the entity meets the requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act as follows: (a) the supply is for consideration as the entity will charge a fee for the services; (b) the supply of is made in the course of the entity's enterprise of providing investigation services; (c) the supply is connected with Australia as the services are performed in Australia; and (d) the entity is registered for GST. As the requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act are satisfied, the supply of services by the entity is a taxable supply unless it is GST-free or input taxed. There is no provision in the GST Act under which the entity's supply of services would be input taxed. What is left to determine is whether the supply is GST-free. The table in subsection 38-190(1) of the GST Act provides a list of supplies (other than supplies of goods and real property) that would be GST-free if certain conditions are met. Under item 2 in the table in subsection 38-190(1) of the GST Act (item 2), a supply is GST-free if the supply is made to a non-resident who is not in Australia when the thing supplied is done, and: (a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with real property situated in Australia; or (b) the non-resident acquires the thing in carrying on the non-resident's enterprise but is not registered or required to be registered for GST. | Detailed Reasoning - Non-resident not in Australia: Goods and Services Tax Ruling GSTR 2004/7 explains when a non-resident is not in Australia when the thing supplied is done for the purpose of item 2. The strict literal interpretation of the 'not in Australia' requirement merely requires a presence of the entity in Australia when the thing supplied is done for that requirement not to be satisfied. Paragraph 184 of GSTR 2004/7 contains our view that the expression 'not in Australia' requires that the non-resident (or other recipient) is not in Australia in relation to the supply. This means that a non-resident (or other recipient of a supply) may satisfy the 'not in Australia' requirement if that entity is in Australia but not in relation to the supply. The non-resident does not have a presence in Australia in relation to the entity's supply of services. The non-resident makes the requests for services and receives the results electronically. We consider that the non-resident is not in Australia when the thing supplied is done. | Detailed Reasoning - Supply of work physically performed on goods or directly connected with real property: The entity's supply of services involves investigations in relation to individuals who live and/or work overseas. As such, the supply of the entity's services is not a supply of work physically performed on goods situated in Australia when the work is done, nor a supply directly connected with real property situated in Australia. | Detailed Reasoning - Non-resident is not registered or required to be registered (paragraph (b) of item 2): As the condition in paragraph (a) of item 2 is satisfied, it is no longer necessary if the requirement in paragraph (b) of item 2 is satisfied. Supply provided to another entity (subsection 38-190(3)) Subsection 38-190(3) of the GST Act provides that a supply covered by item 2 is not GST-free if: (a) it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and (b) the supply is provided, or the agreement requires it to be provided, to another entity in Australia. The agreement between the entity and the non-resident does not require the entity to provide its services to another entity in Australia. Therefore, subsection 38-190(3) of the GST Act does not apply. | Detailed Reasoning - Conclusion: The supply of services by the entity made to the non-resident satisfies the requirements of item 2 in the table in subsection 38-190(1) of the GST Act. Therefore, the supply is GST-free. It is not a taxable supply.