Private ruling: GST and supply of services made to a non-resident
Date of advice: 9 November 2017
Published: March 2018

Ruling: Q2: Is the supply of data services made by the Australian company to the overseas subscriber under scenario 2 in the Agreement a GST - free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? Advice Yes, the supply of data services made by the Australian company to the overseas subscriber under scenario 2 in the Agreement is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act


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 38-190

Reasons for decision: Summary: GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if: a. the supplier makes the supply for consideration; and b. the supply is made in the course or furtherance of an enterprise that the supplier carries on; and c. the supply is connected with Australia; and d. the supplier is 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. All of the above must be satisfied for your supply to the overseas company to be a taxable supply. The Agreement provides that will act as a marketing and collecting agent for the overseas company in regard to its sale of data report to the overseas subscriber. In this instance you are making a supply of agency services to the overseas company. From the information given, your supply of agency services satisfies paragraphs (a) to (d) of section 9-5 of the GST Act as: a) you make your supply for consideration; and b) the supply is made in the course of a business that you carry on; and c) your supply is connected with Australia as it is made through a business that you carry on in Australia; and d) you are registered for GST. However, your supply of agency services is not a taxable supply to the extent that it is GST-free or input taxed. There is no provision under the GST Act that makes your supply of agency services input taxed. GST-free supply Relevant to your supply of agency services to the overseas company is item 2 in the table in subsection 38-190(1) of GST Act (item 2). Item 2 provides that a supply of a thing (other than goods or real property) made to a non-resident is GST-free if it is a supply that is made to a non-resident that 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. Only one of the paragraphs in item 2 needs to be satisfied. Paragraph (a) of item 2 From the fact given, your supply of agency services to the overseas company satisfy paragraph (a) of item 2 as: ● your supply is made to a non-resident that is not in Australia in relation to your supply when the supply is done since the overseas company is a non-resident company located outside Australia and does not carry on any business activity in Australia; and ● your supply of agency services 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 Your supply of agency services is GST-free under paragraph (a) of item 2 to the extent that it is not negated by subsection 38-190(3) of the GST Act. As paragraph (a) is satisfied there is no need to consider paragraph (b) of item 2. Subsection 38-190(3) of the GST Act Subsection 38-190(3) of the GST Act provides that without limiting subsection 38-190(2) or (2A), a supply covered by item 2 in that table 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; and c) for a supply other than an input taxed supply – none of the following applies: i. the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it; ii. the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or iii. the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient’s acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense. From the facts given, subsection 38-190(3) of the GST Act does not apply to your supply of agency services to the overseas company as you are not required to provide your supply of agency services to another entity in Australia. Your supply of agency services to the overseas company is therefore GST-free under item 2. In scenario 2 you act as a reseller for the data report sold to the overseas subscriber. When you sell the data report to the overseas report to the overseas subscriber your supply will satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act as: a) you make your supply for consideration; and b) the supply is made in the course of a business that you carry on; and c) your supply is connected with Australia as the supply of data report is made through a business that you carry on in Australia; and d) you are registered for GST. However, your supply of data report is not a taxable supply to the extent that it is GST-free or input taxed. There is no provision under the GST Act that makes your supply of data report input taxed. The next step is to determine whether your supply of data report to the overseas subscriber is GST-free. GST-free supply The supply of a data report is characterised as a supply of services for GST purposes. Relevant to your supply of services to the overseas subscriber is item 2 in the table in subsection 38-190(1) of GST Act (item 2). From the fact given, your supply of services to the overseas subscriber satisfy paragraph (a) of item 2 as: ● your supply is made to a non-resident that is not in Australia in relation to your supply when the supply is done since the overseas subscriber is a non-resident company located overseas and does not carry on any business activity in Australia; and ● your supply of services 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 Your supply of data services is GST-free under paragraph (a) of item 2 to the extent that it is not negated by subsection 38-190(3) of the GST Act. From the facts given, subsection 38-190(3) of the GST Act does not apply to your supply of data services to the overseas subscriber as you are not required to provide your supply of data services to another entity in Australia. Your supply of data services to the overseas subscriber is therefore GST-free under item 2.

Question 1: Is the supply of agency services made by the Australian company to the overseas company under scenario 1 in the Agreement a GST - free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | Yes, the supply of agency services made by the Australian company to the overseas company under scenario 1 in the Agreement is a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act. | Relevant facts: You are an Australian company and registered for the goods and services tax. | You have an agreement with an overseas company in which you agree to make the supplies as per the two scenarios descried in the Agreement. The overseas company does not carry on any business activity in Australia. | Scenario 1: ● You, in Australia acts as an authorised marketing agent for the overseas company, taking responsibility with seeking subscriber for the overseas company. | ● You are approved by the overseas company to collect payment from subscriber on behalf of the overseas company. After deducting appropriate percentage of total charges as commission, you will transfer the remaining payment to the overseas company. | ● The overseas company collects the subscriber detail from you, and issues invoice to the subscriber directly. Invoice may include the details of data report order, possible preparation period and method of data delivery to subscriber. | ● Data report will be delivered to subscriber by the overseas company after you confirm the payment from subscriber. | ● You will not be involved in any preparation of data report in Australia for the subscriber. | ● You, in Australia act as a reseller for the data report provided by the overseas company to subscriber. | ● You are legally given permission by the overseas company to issue the invoice to subscriber after fully understanding the subscriber special requirement for data report. | ● You request payment from subscriber after order is confirmed and then transfer agreed amount of charges for the data report to the overseas company for proceeding with data preparation. The overseas company holds responsibility for the preparation of data based on subscriber's special requirement. | ● You only have right for resale of the data report generated for subscriber. | ● The link to access the data will be provided to you by the overseas company who would pass the information to subscriber. | The subscribers in both scenarios are non-resident and they do not carry on any business activity in Australia. | Reasons for decision: Note : Where the term ‘Australia’ is used in this document, it is referring to the ‘indirect tax zone’ as defined in section 195-1 of the GST Act.