Private ruling: GST and the supply to a non resident entity
Published: May 2013

Ruling: Q1: Is the supply of repair and maintenance services made to a non-resident entity (NRE), but provided to a customer of NRE in Australia, a taxable supply? | A1: Yes. The supply of repair and maintenance services that is made to NRE, but provided to a customer of NRE in Australia, is a taxable supply.

Relevant facts and circumstances: You are registered for GST. You carry on a business in Australia. NRE is located in Country X. NRE is not registered for GST in Australia and does not have a presence in Australia. NER is a manufacturer of X equipment. An Australian third party company (Aus Co) is a customer of NRE and owns equipment that was purchased from NRE Under an offshore warranty service agreement between Aus Co and NRE, repair work on the equipment is necessary to fulfil NRE's obligations under the warranty. NRE contracts with you to perform the services for Aus Co. There is no written agreement between you and NRE. Only a verbal agreement is in place for the repair work to be carried out. You carry out repair and maintenance work on the equipment which is located in Australia for Aus Co. The work consists of servicing NRE's equipment when they are unable to correct faults on their equipment remotely. You invoice NRE for the repair worked that was performed in Australia and have charged GST.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(1) | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(3)

Reasons for decision: Summary: The supply of repair and maintenance services that is made to NRE, but provided to a customer of NRE in Australia, is a taxable supply. | Detailed Reasoning - Detailed reasoning: · Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a taxable supply is made if: · you make the supply for consideration; and · the supply is made in the course or furtherance of an enterprise that you carry on; and · the supply is connected with Australia; and · 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. From the facts given, you satisfy all the conditions of paragraphs 9-5(a) to (d) of the GST Act, as: · you make a supply of repairs and maintenance services and in return you will receive consideration for the supply by way of payments · you supply the repairs and maintenance services in the course or furtherance of your business · you supply the repairs and maintenance services through an enterprise that you will carry on in Australia (and therefore the supply will be connected with Australia); and · you are registered for GST. Hence, the supply of repairs and maintenance services will be taxable to the extent that it is not GST-free or input taxed. The supply of repairs and maintenance services to a non-resident will not satisfy any of the input taxed provisions under the GST Act. GST-free Goods and Services Tax Ruling 2004/7 (GSTR 2004/7) deals with certain GST-free provisions under Division 38 of the GST Act. In particular, item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) is relevant in your circumstances. Item 2 applies to a supply of a thing, other than a supply of goods or real property, which is made to a non-resident. Item 2 appears in the table in subsection 38-190(1) of the GST Act as follows: | Detailed Reasoning - These supplies are GST-free (except to the extent that they are supplies of goods or real property)...: 2 Supply to non-resident outside Australia. a supply that 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-residents enterprise, but is not registered or required to be registered. A supply is GST-free under Item 2 if it meets the requirement that the non-resident is not in Australia, and satisfies either paragraph (a) or (b) of Item 2. Non-resident is not in Australia For a supply to be within the scope of Item 2, the supply must be made to a non-resident not in Australia when the thing is done. From the information you have provided, the non-resident is not in Australia when the thing supplied is done. (b) Non-resident company not registered or required to be registered Where the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered, the supply of repair and maintenance services satisfies the requirements under paragraph (b) of Item 2. As the non-resident is not registered or required to be registered the requirements under paragraph (b) of Item 2 are satisfied. As only one of the paragraphs (a) or (b) needs to be satisfied the supply of consultation services to the non-resident is a supply which satisfies Item 2. However, Item 2 may be limited by subsection 38-190(3) of the GST Act. To whom the supply is provided Goods and Services Tax Ruling 2005/6 (GSTR 2005/6) is about the operation of subsection 38-190(3) of the GST Act. In this particular case, the ruling addresses when a supply covered by Item 2 is 'under an agreement entered into, whether directly or indirectly, with a non resident' and looks at certain contracts and supply arrangements. Subsection 38-190(3) of the GST Act provides that a supply covered by Item 2 is not GST-free if: · it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and · the supply is provided, or the agreement requires it to be provided, to another entity in Australia. The term 'provided' in the context of subsection 38-190(3) of the GST Act is used to distinguish between the recipient of the supply in a contractual sense and the entity that is provided with the supply in an actual sense. Paragraph 38-190(3)(a) of the GST Act requires the Item 2 supply to be under an agreement entered into with a non-resident. Paragraph 38-190(3)(b) of the GST Act looks at the actual flow of the supply, which is the provision of the supply and whether it is provided to an entity in Australia. The supply of repairs and maintenance services to NRE by you is a supply under a verbal agreement entered into with NRE. Paragraph 38-190(3)(a) of the GST Act is therefore satisfied. The supply of repairs and maintenance services is provided to Aus Co, an Australian customer. That is, the flow of the actual repairs and maintenance services is to the Australian customer and not to the NRE which means paragraph 38-190(3)(b) of the GST Act is satisfied. Accordingly, subsection 38-190(3) of the GST Act excludes the supply of repairs and maintenance services from being a GST-free supply under Item 2. The supply of repairs and maintenance services is neither GST-free under any other provisions in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, you satisfy section 9-5 of the GST Act and the services that you provide are taxable.