Private ruling: GST and supply of services to a non-resident
Date of advice: 6 September 2018
Published: October 2018

Ruling: Q1: Is the supply of service by the entity to the non-resident GST-free under subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 ? | A1: Yes, the supply of service by the entity to the non-resident is GST-free under subsection 38-190(1) of the GST Act?

Relevant facts and circumstances: The entity is a company in Australia that is registered for GST. The entity is accredited by an overseas organisation to provide to provide services necessary for the export of particular goods. The non-resident purchases the goods and acquires the services of the entity in respect of the goods before they are shipped to a destination outside Australia. The entity bills the non-resident for its services. The non-resident is not registered or required to be registered for GST. The non-resident does not have any employee, officer, or agent in Australia carrying on its enterprise from a fixed place or from one or more places in Australia for more than 183 days in a 12-month period.

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 9-27 | 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 or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with the indirect tax zone; 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 entity supplies its services to the non-resident for a fee. The entity makes the supply in the course of carrying on its enterprise. The supply is connected with the indirect tax zone as the entity makes it through an enterprise that it carries on in the indirect tax zone. The entity is registered for GST. All the requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act are satisfied. Therefore, the entity’s supply of services to the non-resident is a taxable supply unless the supply is GST-free or input taxed. There is no provision in the GST Act under which the entity’s supply of its services to the non-resident would be input taxed. Under subsection 38-190(1) of the GST Act certain supplies of things, other than goods or real property, for consumption outside the indirect tax zone are GST-free. Item 2 in the table in subsection 38-190(1) (item 2) provides that a supply that is made to a non-resident who is not in the indirect tax zone when the thing supplied is done is GST-free if: (a) the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone; 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. Item 3 in the table in subsection 38-190(1) of the GST Act (item 3) provides that a supply is GST-free if: (a) the supply is made to a non-resident who is not in the indirect tax zone when the thing supplied is done; and (b) the effective use or enjoyment of the supply takes place outside the indirect tax zone. Item 3 does not apply to a supply of work physically performed on goods situated in the indirect tax zone when the thing supplied is done, or a supply directly connected with real property situated in the indirect tax zone. For the purpose of item 2 and item 3, a non-resident is in the indirect tax zone if it carries on its enterprise in the indirect tax zone. Subsection 9-27(1) of the GST Act states: (1) An *enterprise of an entity is carried on in the indirect tax zone if: (a) the enterprise is *carried on by one or more individuals covered by subsection (3) who are in the indirect tax zone; and (b) any of the following applies: (i) the enterprise is carried on through a fixed place in the indirect tax zone; (ii) the enterprise has been carried on through one or more fixed places in the indirect tax zone for more than 183 days in a 12 month period; (iii) the entity intends to carry on the enterprise through one or more places in the indirect tax zone for more than 183 days in a 12 month period. ‘Individuals’ referred to in paragraph 9-27(1)(a) above include: (a) if the entity is an individual – that individual; (b) an employee or officer of the entity; (c) an individual who is, or is employed by, an agent or other agent of independent status that is acting in the ordinary course of the agent’s business as such an agent. The non-resident does not have any employee, officer, or agent in Australia carrying on its enterprise from a fixed place or from one or more places in Australia for more than 183 days in a 12-month period. Furthermore, the non-resident does not have any employee, officer or agent at the time the entity performs the services. As such, the non-resident is not in the indirect tax zone for the purpose of item 2 and 3. The non-resident acquires the services of the entity in the course of its enterprise but is not registered or required to be registered for GST; thus paragraph (b) of item 2 is satisfied. Accordingly, the supply of the services by the entity to the non-resident is GST-free.