Private ruling: GST and supply of a right
Date of advice: 18 October 2017
Published: March 2018

Ruling: Q1: Is the supply from Entity A (you) to a non-resident of bandwidth on its antenna located in the indirect tax zone a GST-free supply under section 38-190 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes.

Relevant facts and circumstances: Entity A is an Australia registered company operating within Australia and is registered for GST. Entity A provides bandwidth on its antenna system(s) located in Australia to customers to enable then to communicate with residents outside Australia. The non-resident recipient of the contracted supply of the right to the bandwidth is located outside of Australia.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5, and | A New Tax System (Goods and Services Tax) Act 1999 section 38-190.

Reasons for decision: Summary: Section 9-5 of the GST Act provides 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 your enterprise that you carry on; and (c) the supply is connected with the indirect tax zone (Australia); and (d) you are registered or required to be registered. However, the supply is not a taxable supply to the extent that it is not GST-free or input taxed. You will make a taxable supply as you satisfy section 9-5 of the GST Act. As you are making a supply, under paragraph 9-10(2)(e) of the right to access bandwidth, for consideration. The supply is made in the course of your enterprise that you carry on; the supply is connected with Australia as you make the supply through your enterprise that you carry on in Australia, and you are registered for GST. There are no provisions that would result in your supply being input taxed however consideration needs to be given to whether it is GST-free under section 38-190 of the GST Act. | Detailed Reasoning - GST-free: Section 38-190 of the GST Act specifies when supplies of things, other than goods or real property, for consumption outside Australia are GST-free. Of relevance to the facts provided is item 4 in the table in subsection 38-190(1) of the GST Act (Item 4). Under Item 4, a supply that is made in relation to rights is GST-free if: (a) the rights are for use outside Australia; or (b) … For the supply to be GST-free under Item 4, the supply must be made in relation to rights and satisfy either paragraph (a) or (b) of Item 4. Goods and Services Tax Ruling GSTR 2003/8 Goods and services tax: supply of rights for use outside Australia - subsection 38-190(1), item 4, paragraph (a) and subsection 38-190(2) (GSTR 2003/8) and the court case, Travelex Ltd v Commissioner of Taxation [2010] HCA 33 ( Travelex Case ), considers the supply of rights for use outside Australia and a supply that is made in relation to rights. | Detailed Reasoning - Supply made in relation to rights: The words 'a supply that is made in relation to rights' mean that all of the types of supplies of rights referred to in paragraph 9-10(2)(e) of the GST Act may be covered by Item 4, that is, the creation, grant, transfer, assignment or surrender of a right. Further, the Commissioner considers that the decision of the High Court in the Travelex case means that the expression 'a supply that is made in relation to rights' in Item 4 covers the supply of a thing (other than goods or real property) where the thing supplied only has value because of rights that attach to it and the transfer of those rights. While the supply of that thing does not need to be characterised as a supply of rights, nevertheless, the supply has to encompass the transfer of rights and the value of the supply needs to be in the rights. Accordingly, the supply of a right to bandwidth by you to a non-resident is a supply made in relation to rights. | Detailed Reasoning - Paragraph (a) - Rights used outside Australia: A supply that is made in relation to rights is GST-free under paragraph (a) of Item 4 if the rights are for use outside Australia. Accordingly, it is the intended use of the rights at the time they are created, granted, transferred, assigned or surrendered that determines whether the rights are for use outside Australia and therefore the extent to which the supply is GST-free. From the facts provided you have stated that the use of the rights of accessing the bandwidth on your antenna is to be used by a non-resident recipient outside of Australia, therefore, paragraph (a) of Item 4 is satisfied and the supply will be GST-free.

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