Private ruling: GST and supplies from a non-resident to a non-resident of a service
Date of advice: 9 November 2016
Published: March 2017

Ruling: Q1: Is Entity A's supply of performance-based logistics services to Entity B, a non-resident entity, a GST-free supply of services pursuant to item 2 (a) in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes.

Relevant facts and circumstances: Entity A is a company created outside of Australia and registered for GST in Australia and is a member of a GST group headed by Entity C, a wholly owned subsidiary of Entity A formed in Australia. Entity B is a non-resident not registered for GST and does not have a presence or personal located in Australia. Entity D is an Australian resident and registered for GST. Entity A is in the business of organising products and providing services to Entity B. Entity A is responsible for the operation of the spare parts pool and other sustainment operations on behalf of Entity B.

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 Subsection 9-26(2), | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-190(1), and | A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-190(3).

Reasons for decision: Summary: GST is payable on taxable supplies. You make a taxable supply under section 9-5 of the GST Act if: (a) you make the supply for consideration; and (b) the supply is made in the course or furtherance of an enterprise 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. On the facts provided, Entity A makes a taxable supply under section 9-5 of the GST Act. As Entity A makes a supply of services to Entity B for consideration, Entity A makes the supply in the course of the enterprise that they carry on, the supply is connected with the indirect tax zone as it is done in the indirect tax zone, and Entity A is registered for GST in Australia. However, the supply is not taxable to the extent it is GST-free or input taxed. There are no provisions that would result in the supply being input taxed; however, we need to consider section 38-190 of the GST Act. The section provides for GST-free supplies except to the extent they are supplies of goods or real property. In particular item 2 (a) in the table in subsection 38-190(1) of the GST Act (Item 2(a)) which provides that a supply that is made to a non-resident who is not in the indirect tax zone when the thing is supplied is done, and the supply is neither a supply of work physically performed on goods situation in the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone will be GST-free. On the facts, Entity A makes a supply to Entity B a non-resident who is not in the indirect tax zone in relation to the supply when it is done and the supply is not a supply of work physically performed on goods and neither is it a supply directly connected with real property; as such Item 2(a) is satisfied. However, as the supply may be provided to another entity in the indirect tax zone, subsection 38-190(3) of the GST Act needs to be considered. Subsection 38-190(3) of the GST Act will negate the GST-free status if Entity A makes a supply under an agreement with a non-resident and the supply is provided to another entity in the indirect tax zone. However, an amendment from 1 October 2016, provides that where the supply (other than an input tax supply) is provided to another entity in the indirect tax zone and the other entity is an Australian based business recipient had the supply been made to it, subsection 38-190(3) will not apply to negate the GST-free status. An entity is an Australian based business recipient under subsection 9-26(2) of the GST Act, if the entity is registered for GST, carries on their enterprise in the indirect tax zone and the entity's acquisition of the thing supplied is not solely of a private or domestic nature. Entity A makes a supply to Entity B under agreement but provides the supply of its services to another entity, Entity D, in the indirect tax zone. As this entity is an Australian based business recipient if the supply had have been made to Entity D and the supply is not input taxed, subsection 38-190(3) of the GST Act will not negate the GST-free status for supplies of Entity A's services. Therefore, Entity A's supply of services to Entity B will be GST-free pursuant to Item 2(a) of the GST Act.