Private ruling: Input tax credit and acquisition of services
Date of advice: 29 July 2019
Published: September 2019
Ruling period: 1 July 2018 - 1 July 2022

Ruling: Q1: Is Company A entitled to claim input tax credits for its acquisition of installation services from Company B? | A1: No. Company A is not entitled to claim input tax credits for its acquisition of installation services from Company B.

Relevant facts and circumstances: Company A is a non-resident that is not registered or required to be registered for GST. Company A does not carry on an enterprise in Australia. Company has manufactured and sold goods to Company C, an Australian-based business, on terms which required: Company A is not in Australia at the time the installation services are done. Company A, Company B and Company C are not related entities. Company B and Company C are both registered for GST.

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 11-5 | A New Tax System (Goods and Services Tax) Act 1999 section 38-190

Reasons for decision: Summary: Section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states: You make a creditable acquisition if: (a) you acquire anything solely or partly for a *creditable purpose; and (b) the supply of the thing to you is a *taxable supply; and (c) you provide, or are liable to provide,*consideration for the supply; and (d) you are *registered, or *required to be registered. Company A's acquisition of the installation services from Company B is for the purpose of its enterprise; and Company A is liable to provide consideration for the supply of the services. Therefore, paragraphs 11-5(a) and 11-5(c) of the GST Act are satisfied. What remains to be determined is whether paragraphs 11-5(b) and 11-5(d) are also satisfied. | Detailed Reasoning - Paragraph 11-5(b): Paragraph 11-5(b) of the GST Act requires that the supply of the thing acquired is a taxable supply. According to section 9-5 of the GST Act, a supply is a taxable supply if: (a) the supply is 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 the indirect tax zone; and (d) the supplier is registered or required to be registered for GST. However, a supply is a taxable supply to the extent that it is GST-free or input taxed. There is no provision in the GST Act under which the supply of installation services which Company A acquired from Company B would be input taxed. Therefore, it must be determined whether the supply would be GST-free Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) provides that a supply, other than goods or real property, is GST-free if it is made to a non-resident that is not in the indirect tax zone when the thing supplied is done; and: (a) the supply is neither a supply of work physically performed on goods situated in the indirect tax zone nor a supply connected with real property situated in the indirect tax zone; or (b) the non-resident acquires the thing in carrying on its 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 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 the indirect tax zone; 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. Company A is a non-resident entity. Company A submitted that it is not in the indirect tax zone at the time the services are done; and that it is not registered, or required to be registered for GST. Therefore, the supply of the installation services is GST-free under item 2 unless subsection 38-190(3) of the GST Act applies. Company B made the supply under an agreement with Company A under which the installation services are provided to Company C. Paragraphs 38-190(3)(a) and 38-190(3)(b) of the GST Act are satisfied. However, Company C is registered for GST and thus, it would be an Australian-based business recipient if the supply had been made to it. Therefore, paragraph 38-190(3)(c) is not satisfied. Accordingly, subsection 38-190(3) does not apply to negate the GST-free status of the supply under item 2. The supply of the installation services remains GST-free. As the supply of the installation services that Company A acquired from Company B is not a taxable supply, paragraph 11-5(b) of the GST Act is not satisfied. Company A is not entitled to claim input tax credit for the acquisition of the installation services from Company Bas it was not a creditable acquisition. | Detailed Reasoning - Paragraph 11-5(d): For completeness, we determine that paragraph 11-5(d) of the GST Act is also not satisfied as Company A submitted that it is not registered or required to be registered for GST. The acquisition of the installation services would still not be a creditable acquisition unless all the requirements in section 11-5 of the GST Act are satisfied.

Company C to import the goods into Australia and enter it for home consumption; and | Company B to install the goods in Australia as an installation contractor to Company A.