Private ruling: goods and services tax (GST) and services supplied to non-residents
Published: December 2012

Ruling: Q1: Is GST payable on your supplies of goods inspection services to non-residents? | A1: No. | Q2: Is GST payable on your supplies of the services of repairing, reworking and modifying goods owned by your non-resident customers? | A2: Yes. | Q3: Is GST payable on your supplies of the local engineering representative services to non-resident customers? | A3: No.

Relevant facts and circumstances: You are registered for GST. You supply the following services to non-resident customers, which are goods suppliers to manufacturers located in Australia: · inspecting goods · repairing, reworking and modifying goods · local engineering representative services. You charge for these services. The engineering representative services involve looking at and analysing goods that may have a quality issue, discussing the issue with the goods plant engineers and then reporting to your overseas customer. The work involved is performed in Australia. The goods are transported to assembly plants in Australia, which are owned by your customers' customers. The goods are owned by your non-resident customers when you inspect, repair, rework or modify them. The non-resident customers are based overseas and they do not have branches in Australia. The non-resident customers agree with their customers that your non-resident customers will be responsible for entering the goods for home consumption. The non-resident customers earn $75,000 or more a year from selling the goods in the situations in question.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1) | A New Tax System (Goods and Services Tax) Act 1999 subsection 9-5 | A New Tax System (Goods and Services Tax) Act 1999 subsection 9-25(3) | A New Tax System (Goods and Services Tax) Act 1999 subsection 9-40 | A New Tax System (Goods and Services Tax) Act 1999 section 23-5 | A New Tax System (Goods and Services Tax) Act 1999 paragraph 23-15(1)(b) | A New Tax System (Goods and Services Tax) Act 1999 section 38-190 | A New Tax System (Goods and Services Tax) Act 1999 Division 188 | A New Tax System (Goods and Services Tax) Act 1999 paragraph 188-15(1)(c) | A New Tax System (Goods and Services Tax) Act 1999 paragraph 188-20(1)(c)

Reasons for decision: Summary: Your supplies of inspection services to the customers in question are GST-free under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), because: · these services are not goods or real property · the recipient of the supplies are non-residents · the non-resident customers are not in Australia when you perform the work · these services do not involve work physically performed on goods situated in Australia when the work is done · the services are not directly related to real property situated in Australia, and · you do not provide these services to a third party in Australia. Therefore, GST is not payable on your supplies of the inspection services to the customers in question. | Detailed Reasoning - Detailed reasoning: GST is payable by you where you make a taxable supply. You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states: 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. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. (*Denotes a term defined in section 195-1 of the GST Act) You satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act, because; · you are supplying services for consideration · you supply the services in the course or furtherance of an enterprise that you carry on · your supplies of the services are connected with Australia as the services are performed in Australia, and · you are registered for GST. There are no provisions in the GST Act under which your supplies of the services are input taxed. Therefore, what remains to be determined is whether your supplies of the services are GST-free. A supply of something other than goods or real property is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act if: the supply 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-resident's enterprise, but is not registered or required to be registered for GST. Subsection 38-190(3) of the GST Act provides that a supply covered by item 2 in the table in subsection 38-190(1) of the GST Act 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. You are supplying services to the customers in question. Services are something other than goods or real property. You are supplying services to non-residents that are not in Australia when the things supplied are done. Paragraph 58 of Goods and Services Tax Ruling GSTR 2003/7 provides guidance on determining whether a supply of work is physically performed on goods. It states: 58. A supply is a supply of work physically performed on goods where something is done deliberately to the goods to change them or to otherwise affect them in some physical way. The repair of goods is an example of work that is physically performed on goods. The inspection services do not involve work physically performed on goods situated in Australia when the work is done because the work does not involve doing something deliberately to goods to change them or to otherwise affect them in some physical way. You are not making supplies that are directly connected to real property located in Australia. Additionally, you do not provide these services to a third party in Australia. Hence, the exception in subsection 38-190(3) of the GST Act does not apply. Therefore, your supplies of the inspection services are GST-free under item 2 in the table in subsection 38-190(1) of the GST Act. Hence, they are not taxable supplies. Therefore, GST is not payable on your supplies of the inspection services. | Summary: Your supplies of repair, rework and modification services to the customers in question are not GST-free under item 2 in the table in subsection 38-190(1) of the GST Act, because: · these services involve work physically performed on goods situated in Australia when the work is done, and · the recipients of the supplies are required to be registered for GST. GST is payable on your supplies of these services to the customers in question because: · you are supplying services for consideration · you supply the services in the course or furtherance of an enterprise that you carry on, · your supplies of the services are connected with Australia as the services are performed in Australia · you are registered for GST, and · your supplies of the services are not GST-free or input taxed. | Detailed Reasoning - Detailed reasoning: You satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act, because; · you are supplying services for consideration · you supply the services in the course or furtherance of an enterprise that you carry on, · your supplies of the services are connected with Australia as the services are performed in Australia, and · you are registered for GST. There are no provisions in the GST Act under which your supplies of the services are input taxed. Therefore, what remains to be determined is whether your supplies of the services are GST-free. You are supplying services to the customers in question. Services are something other than goods or real property. You are supplying services to non-residents that are not in Australia when the things supplied are done. The repair, reworking and modification services involve work that is done deliberately to goods to change them or to otherwise affect them in some physical way. Therefore, the work is work physically performed on goods. The goods are situated in Australia when the work is done. An entity is required to be registered for GST if it satisfies the requirements of section 23-5 of the GST Act. An entity is required to be registered for GST if: (a) it is carrying on an enterprise, and (b) its GST turnover meets the registration turnover threshold of $75,000. Your customers are carrying on enterprises. Therefore, the requirement of paragraph 23-5(a) of the GST Act is satisfied. In accordance with paragraph 188-15(1)(c) and paragraph 188-20(1)(c) of the GST Act, supplies that are not connected with Australia are not included in the calculation of GST turnover. Section 9-25 of the GST Act sets out when a supply will be connected with Australia. Subsection 9-25(3) of the GST Act provides that a supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either: (a) imports the goods into Australia, or (b) installs or assembles the goods in Australia. Paragraph 55 of Goods and Services Tax Ruling GSTR 2003/15 provides guidance on determining who imports goods into Australia where more than one party causes the goods to be brought to Australia. It states: 55. In respect of a single importation, more than one party may cause goods to be brought to Australia for application to their purposes. One entity may send the goods to Australia to supply them, and another entity may request or arrange for the goods to be sent so that it can acquire them to use or resell. Where this is the case, the importing entity is the one that finalises the importation process by completing the customs formalities. That is, the entity that enters the goods for home consumption is the entity that imports the goods in these circumstances. Your customers' sales of goods in the situations in question involve goods being brought to Australia. Your customers are regarded as importing the goods into Australia as they send them to Australia to supply them and they enter these goods for consumption. Therefore, your customers' sales of the goods in the situations in question are supplies connected with Australia. Hence, your customers' sales of goods in the situations in question are included in the calculation of GST turnover. As the income your customers earn from selling goods in the situations in question is $75,000 or more a year, the requirement of paragraph 23-5(b) of the GST Act is satisfied. As both of the requirements of section 23-5 of the GST Act are satisfied by your customers, they are required to be registered for GST. Therefore, you do not make GST-free supplies under item 2 in the table in subsection 38-190(1) of the GST Act where you supply repair, reworking and modification services to the customers in question. There are no provisions in the GST Act under which your supplies of the repair, rework or modification services are GST-free. Hence, you make taxable supplies of these services, as all of the requirements of section 9-5 of the GST Act are satisfied. Therefore, GST is payable on your supplies of the repair, rework and modification services. | Summary: Your supplies of local engineering representative services to the customers in question are GST-free under item 2 in the table in subsection 38-190(1) of the GST Act, because: · these services are not goods or real property · the recipient of the supplies are non-residents · the non-resident customers are not in Australia when you perform the work · these services do not involve work physically performed on goods situated in Australia when the work is done · the services are not directly related to real property situated in Australia, and · you do not provide these services to a third party in Australia. Therefore, GST is not payable on your supplies of the local engineering representative services to the customers in question. | Detailed Reasoning - Detailed reasoning: You satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act, because; · you are supplying services for consideration · you supply the services in the course or furtherance of an enterprise that you carry on · your supplies of the services are connected with Australia as the services are performed in Australia, and · you are registered for GST. There are no provisions in the GST Act under which your supplies of the services are input taxed. Therefore, what remains to be determined is whether your supplies of the services are GST-free. You are supplying services to your customers in question. Services are something other than goods or real property. You are supplying services to non-residents that are not in Australia when the things supplied are done. The local representative services do not involve work physically performed on goods situated in Australia when the work is done as they do not involve doing something deliberately to goods to change them or to otherwise affect them in some physical way. These services are not directly connected with real property situated in Australia. Additionally, you do not provide these services to a third party in Australia. Hence, the exception in subsection 38-190(3) of the GST Act does not apply. Therefore, you make a GST-free supply of the local engineering representative services under item 2 in the table in subsection 38-190(1) of the GST Act. Hence, you do not make a taxable supply of these services. Therefore, GST is not payable on your supplies of the services.

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