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  • Issue 15 – Warranties

    15.a. How are warranty plans treated for GST purposes?

    For source of ATO view, refer to:

    • paragraphs 56 to 69 of GSTR 2003/7 - Goods and services tax: what do the expressions 'directly connected with goods or real property' and 'a supply of work physically performed on goods' mean for the purposes of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999?
    • principles in GSTR 2005/6 - Goods and services tax: the scope of subsection 38-190(3) and its application to supplies of things (other than goods or real property) made to non-residents that 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.

    There is no GST liability in respect of statutory warranties or the standard manufacturer's warranty included in the price of a motor vehicle sold before 1 July 2000, (subsection 12 (1A) of the Transition Act).

    However, any warranties offered by the dealer in excess of these warranties for which there is a separate charge, such as 'extended warranties', will be subject to GST to the extent that the warranty relates to the period on or after 1 July 2000.

    Warranties sold on or after 1 July 2000 will be subject to GST.

    15.b. Withdrawn 29/01/2004

    15.c. Is a warranty repair carried out by a dealer for a customer a taxable supply?

    Non-interpretative - other references: refer to general principles in:

    • GSTR 2003/7 - Goods and services tax: what do the expressions 'directly connected with goods or real property' and 'a supply of work physically performed on goods' mean for the purposes of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999?
    • GSTR 2004/7 - Goods and services tax: in the application of items 2 and 3 and paragraph (b) of item 4 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999      
      • when is a 'non-resident' or other 'recipient' of a supply 'not in Australia when the thing supplied is done'?
      • when is 'an entity that is not an Australian resident' 'outside Australia when the thing supplied is done'?
       
    • GSTD 2006/1 - Goods and services tax: is a payment from a non-resident car manufacturer to an Australian distributor under an offshore warranty chargeback arrangement subject to GST?

    No. It is not a taxable supply as no consideration is provided by the customer to the dealer.

    15.d. Is warranty work carried out by a dealer that is invoiced to the manufacturer/importer a taxable supply?

    Non-interpretative - other references: refer to general principles in:

    • GSTR 2003/7 - Goods and services tax: what do the expressions 'directly connected with goods or real property' and 'a supply of work physically performed on goods' mean for the purposes of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999?
    • GSTR 2004/7 - Goods and services tax: in the application of items 2 and 3 and paragraph (b) of item 4 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999      
      • when is a 'non-resident' or other 'recipient' of a supply 'not in Australia when the thing supplied is done'?
      • when is 'an entity that is not an Australian resident' 'outside Australia when the thing supplied is done'?
       
    • GSTD 2006/1 - Goods and services tax: is a payment from a non-resident car manufacturer to an Australian distributor under an offshore warranty chargeback arrangement subject to GST?

    Yes. The work carried out by the dealer is in return for consideration from the manufacturer/importer, therefore the supply by the dealer is a taxable supply.

    15.e. Is a warranty claim made by a manufacturer/importer on an overseas manufacturer a taxable supply?

    For source of ATO view, refer to:

    • paragraphs 56 - 69 of GSTR 2003/7 - Goods and services tax: what do the expressions 'directly connected with goods or real property' and 'a supply of work physically performed on goods' mean for the purposes of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999?
    • GSTR 2005/6 - Goods and services tax: the scope of subsection 38-190(3) and its application to supplies of things (other than goods or real property) made to non-residents that 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.

    Where the manufacturer/importer makes a claim under a warranty provided by an overseas manufacturer it may not be a taxable supply, depending on the factual circumstances if:

    • no consideration is provided
    • there is no supply
    • the supply is not connected with Australia, or
    • the supply would be GST-free.

    A supply is not GST-free if it is made to a non-resident but that supply is provided, or the agreement requires it to be provided, to another entity in Australia.

    Refer to GSTR 2005/6Goods and services tax: the scope of subsection 38-190(3) and its application to supplies of things (other than real property) made to non-residents that are otherwise GST-free under item 2 of the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999, see paragraphs 484-491 - (Example 21).

    15.f. Is a warranty claim made by a local car manufacturer or distributor on a local component manufacturer a taxable supply?

    Non-interpretative - other references: refer to general principles in GSTR 2003/7 - Goods and services tax: what do the expressions 'directly connected with goods or real property' and 'a supply of work physically performed on goods' mean for the purposes of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999?

    GSTR 2004/7 - Goods and services tax: in the application of items 2 and 3 and paragraph (b) of item 4 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999:

    • when is a 'non-resident' or other 'recipient' of a supply 'not in Australia when the thing supplied is done'?
    • when is 'an entity that is not an Australian resident' 'outside Australia when the thing supplied is done'?

    GSTD 2006/1 - Goods and services tax: is a payment from a non-resident car manufacturer to an Australian distributor under an offshore warranty chargeback arrangement subject to GST?

    No. It is not a taxable supply as no consideration is provided by the local car manufacturer or distributor.

    15.g. Is GST payable on refunds from overseas suppliers where the goods have been rejected by the importer?

    Non-interpretative - other references: refer to general principles in GSTR 2003/7 - Goods and services tax: what do the expressions 'directly connected with goods or real property' and 'a supply of work physically performed on goods' mean for the purposes of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999?

    GSTR 2004/7 - Goods and services tax: in the application of items 2 and 3 and paragraph (b) of item 4 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999:

    • when is a 'non-resident' or other 'recipient' of a supply 'not in Australia when the thing supplied is done'?
    • when is 'an entity that is not an Australian resident' 'outside Australia when the thing supplied is done'?

    GSTD 2006/1 - Goods and services tax: is a payment from a non-resident car manufacturer to an Australian distributor under an offshore warranty chargeback arrangement subject to GST?

    No. The amount received by the importer is the return of the money paid for inferior goods. The importer being the person to whom the money is refunded is not making a supply therefore no GST is payable.

    15.h Withdrawn 29 January 2004

      Last modified: 07 Jun 2012QC 16411