Private ruling: GST and online booking service
Date of advice: 14 October 2015
Published: October 2015

Ruling: Q1: Is the supply of booking services by a non-resident company to customers in Australia in return for the Servicing Fee an out of scope supply, and not subject to GST, on the basis that it is not a supply connected with the indirect tax zone for the purposes of section 9-25 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes | Q2: Is the supply of services by both Aus Company A and Aus Company B to a non-resident Company, pursuant to the Services Agreement, GST-free supplies pursuant to Item 2 of section 38-190(1) of the GST Act? | A2: Yes

Relevant facts and circumstances: A non-resident company is incorporated overseas, and is not currently registered for ABN or GST purposes in the indirect tax zone. The non-resident company is part of the wider Corporate Group (the Group), that includes Company A and Company B, both companies incorporated in Australia and registered for ABN and GST purposes. The Group has now decided to centralise its global customer service functions (and management) through the non-resident company overseas. The non-resident company and Company A and Company B are parties to Terms and Conditions (T&C's) that bind customers who seek to make a booking using the websites. The non-resident company provides access to content to allow its customers to make bookings. Company A and B acts as agent, arranging bookings and receiving payment. These services provided to customers are collectively referred to as Booking Services. The supply of these Booking Services are taxable. In addition to the Booking Services provided, the non-resident company provides various customer management services to the customers. These services relate to customer bookings and are largely provided by telephone, email and live chat. The provision of these Customer Services are largely subcontracted by the non-resident Company to various service providers overseas. The non-resident company charges service fees to customers for these services, which can include a flat Servicing Fee; and an additional phone fee where certain services are undertaken over the phone, The Customer Service Fees are collected by Aus Company A and B as agent for the non-resident Company, to avoid the extra credit card merchant fee and the potential international charges for the customer that would arise from charging the Booking Fees and Customer Service Fees separately.

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 9-25, | A New Tax System (Goods and Services Tax) Act 1999 Section 38-190 and | A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.

Reasons for decision: Summary: GST is payable on taxable supplies and taxable importations. Section 9-5 of the GST Act states that 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 Australia; and (d) you are registered, or required to be registered for GST. However, the supply is not a taxable supply to the extent that it is GST-free or input taxed. From the facts given, the non-resident Company have satisfied the requirements in paragraphs 9-5(a) and 9-5(b) of the GST Act as the supply of the booking services to the client is made in the course of an enterprise that the non-resident Company carries on and for a fee. We also need to determine whether the non-resident Company's supply of booking services satisfies paragraphs 9-5(c) and (d) of the GST Act. Subsection 9-25(5) of the GST Act provides that a supply of anything other than goods or real property is connected with the indirect tax zone if: (a) the thing is done in the indirect tax zone; or (b) the supplier makes the supply through an enterprise that the supplier carries on in the indirect tax zone; or (c) all the following apply: (i) neither paragraph (a) nor (b) applies in respect of the thing; (ii) the thing is a right or option to acquire another thing; (iii) the supply of the other thing would be connected with the indirect tax zone. 'Thing' is defined in section 195-1 of the GST Act to mean anything that can be supplied or imported. Things other than goods or real property that can be supplied include services, advice, information, rights, obligations to do anything, or any combination of these things. Under paragraph 9-25(5)(a) of the GST Act the connection with the indirect tax zone requires that the 'thing' being supplied is 'done' in the indirect tax zone. The meaning of 'done' depends on the nature of the 'thing' being supplied. 'Done' can mean, for example, performed, executed, completed, finished and so on depending on what is supplied. Goods and Services Tax Ruling GSTR 2000/31 'supplies connected with Australia' explains our view on when a supply is connected with the indirect tax zone under section 9-25 of the GST Act. GSTR 2000/31 states that if the thing being supplied is a service, the supply of that service is typically done where the service is performed. If the service is performed in the indirect tax zone, the service is done in the indirect tax zone and the supply of that service is connected under paragraph 9-25(5)(a) of the GST Act. The non-resident Company does not require its personnel to be physically present in Australia for the provision of its Customer Service. Communication with customers is done by phone and email. However, if a supply of a thing is not connected with the indirect tax zone because the service is not done in the indirect tax zone, the supply is still connected if, under paragraph 9-25(5)(b) of the GST Act, the supplier makes the supply through an enterprise that the supplier carries on in the indirect tax zone. In this case the non-resident Company is not incorporated in Australia, does not have any employees in Australia, or operate out of any establishment in Australia, nor make the supply through an Australian agent. Therefore, the supply of the booking services is not made through an enterprise that is carried on in the indirect tax zone. In summary, the supply of the non-resident Company's booking services to the Australian client is not connected with the indirect tax zone. It is not a taxable supply as it does not satisfy all the requirements in section 9-5 of the GST Act and therefore the non-resident Company is not liable for GST on the supply. The supply is of services between resident entities and a non-resident entity. Item 2 in the table in Subsection 38-190(1) provides that the following supply is GST-free: a supply that is made to a * non-resident who is not in the indirect tax zone when the thing supplied is done, and: (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. We have considered below each of the components of the test in Item 2 that must be satisfied in order for the supply of the services by Aus Company A and Aus Company B to a non-resident Company to be GST-free: • The supply of the services by Aus Company A and Aus Company B are not a supply of goods or real property • The non-resident Company does not carry on an enterprise in Australia, and is therefore not in the indirect tax zone for the purposes of the supply of the services. • The supply of the services is neither a supply of work physically performed on goods situated in the indirect tax zone, or a supply directly connected with real property in the indirect tax zone. • The non-resident Company acquires the services in the course of carrying on its own enterprise, but is not registered or required to be registered for GST in the indirect tax zone. Therefore the supply of the services falls within either limb of Item 2 in section 38-190(1), and is therefore GST-free.