Private ruling: GST and supply made to a non-resident entity
Published: September 2013

Ruling: Q1: What is the goods and services tax (GST) status of your supply under the Agreement with the non-resident entity? Advice Under the Agreement, you are making a supply of rights to the non-resident entity. Your supply of rights is GST-free under item 4(b) in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (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; and | A New Tax System (Goods and Services Tax) Act 1999 section 195-1.

Reasons for decision: Detailed Reasoning - Characterisation of supply: Before we determine the GST status of your supply under the terms and conditions in the Agreement you have with the non-resident entity for the use of the non-resident entity's services and sale of your book we need to determine the character of your supply. Under the terms and conditions in the Agreement you grant the non-resident entity a non-exclusive licence during the term of the Agreement to print, distribute and sell your book through E-stores and other sales channels. The non-resident entity has sole and complete discretion to set the retail price at which your titles are sold. For any unit sold to a customer you will be paid the applicable content licence royalty. In this instance, you are making a supply of printing, marketing, distributing and selling rights (supply of rights) to the non-resident entity who on receipt of the rights will undertake the printing, marketing and sale of the book to the customer for the purpose of their own business activity. The next step is to determine the GST status of your supply of rights to the non-resident entity. | Detailed Reasoning - GST status of supply of rights: GST is payable on a taxable supply. To be a taxable supply, the supply of rights must meet the conditions in section 9-5 of the GST Act. This section provides 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 information received, you satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act as: (a) you make the supply for consideration since you receive a royalty when supplying the rights; (b) the supply is made in the course of an enterprise (business) that you carry on; (c) the supply is connected with Australia as the supply of rights is made through a business that you carry on in Australia; and (d) you are registered for GST. However, the supply of rights is not a taxable supply to the extent that it is GST-free or input taxed. Your supply of rights to the non-resident entity is not input taxed under any provision in the GST Act. The next step is to consider whether the supply is GST-free. | Detailed Reasoning - GST-free: Under section 38-190 of the GST Act supplies other than supplies of goods or real property for consumption outside Australia are GST-free. Of particular relevance to the supply of rights 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) the supply is to an entity that is not an Australian resident and is outside Australia when the thing supplied is done. Under the Agreement, when you supply the right to the non-resident entity your supply of rights is GST-free under paragraph (b) of item 4 as the non-resident entity is not an Australian resident and is outside Australia when you supply the rights to them. | Detailed Reasoning - Limitations: Under subsection 38-190(2) of the GST Act, a supply covered by any of items 1 to 5 in the table in subsection 38-190(1) of the GST Act is not GST-free if it is the supply of a right or option to acquire something the supply of which would be connected with Australia and would not be GST-free. From the information received, subsection 38-190(2) of the GST Act is not applicable to your supply of rights to the non-resident entity since it is not a supply of a right or option to acquire something the supply of which would be connected with Australia. | Summary: Under the Agreement, when you supply the rights to the non-resident entity your supply of rights is GST-free under paragraph (b) of item 4 and therefore you are not liable to pay GST on the supply.

Relevant facts: You are an Australian company and registered for GST. | You hold an Agreement with a non-resident entity located overseas. The Agreement contains the complete terms and conditions that apply to your use of the non-resident's services in regard to the sale of your book. You have given us a copy of the Agreement. | You advised that under the Agreement the book is printed, distributed and sold through Estores and other sales channels. The non-resident entity can change the price of the book to be sold. You receive a royalty for the sale of each printed book. | The Agreement provides the following: | · The Agreement contains the complete terms and conditions to your use of the non-resident entity's services. In order to use the services you need to have an online account with the non-resident and be lawfully able to enter into contracts. | · Once you are registered and have provided to the non-resident entity all the required information, you are entitled to the non-resident entity's services which may include facilitating the distribution of your Title, the listing of your Title on the E-Stores and other sales channels, the printing of units and the fulfilment of unit orders on your behalf. | · The non-resident entity, may in their sole discretion, at any time and without notice to you reject the content or remove or refuse to list or distribute any content on or from any E-Store or other sales channel. | · The non-resident entity will be the seller of record for each physical product of your Title for each purchase. They have sole and complete discretion to set the retail price at which your Title is sold. | · You will provide a List price for each Title you elect to be distributed in the applicable currency which will be at or below the suggested retail price. | · The non-resident entity will determine how to handle customer returns of units. | · For each unit sold to a customer the non-resident entity will pay you the applicable content license royalty. | · You grant to the non-resident entity a non-exclusive licence with respect to book, during the term of the Agreement, to print, distribute and sell your book through the E-Stores and other sales channels. So long the non-resident entity pays you the applicable content licence royalty upon the manufacture of your book, the non-resident may print a reasonable number of copies of any book to hold in their inventory. The non-resident may destroy inventory at any time without obligation to you. | · You own all right, title and interest in and to the content including all patent, copyright, trademark, service mark, mask work, moral right, trade or other intellectual or proprietary right (collectively , 'intellectual property Rights') . The non-resident entity will own all right, title and interest in and to the templates and other materials created, provided or used by them in their performance under the Agreement.