ATO Interpretative Decision

ATO ID 2004/948

Goods and services tax

GST and supply of goods imported by a recipient where the non-resident supplier subsequently installs the goods in Australia under a separate contract
FOI status: may be released

With effect from 1 July 2015, the term 'Australia' is replaced in nearly all instances within the GST, Luxury Car Tax and Wine Equalisation Tax legislation with the term 'indirect tax zone' by the Treasury Legislation Amendment (Repeal Day) Act 2015. The scope of the new term, however, remains the same as the repealed definition of 'Australia' used in those Acts. For readability and other reasons, where the term 'Australia' is used in this document, it is referring to the 'indirect tax zone' as defined in subsection 195-1 of the GST Act.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the entity, a non-resident, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it supplies goods, to an Australian customer, that it subsequently installs in Australia under a separate contract?

Decision

Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies goods, to an Australian customer, that it subsequently installs in Australia under a separate contract.

Facts

The entity is a non-resident that is registered for goods and services tax (GST).

Under a sale of goods contract, the entity sold goods to an Australian customer for consideration. The supply of the goods is not GST-free or input taxed.

The sale was on Delivered Ex Quay (DEQ) terms, where the entity was responsible for discharging the goods at the quay (port of destination) and the customer was responsible for clearing the goods for importation and paying for all formalities, duties, taxes and other charges upon importation.

At a later date, both parties entered into a separate contract where the entity agreed to install the goods in Australia for the customer. This separate contract was entered into before the goods were imported into Australia.

Reasons for Decision

Under section 9-5 of the GST Act, an entity makes a taxable supply if:

•: it makes the supply for consideration
•: it makes the supply in the course or furtherance of an enterprise that it carries on
•: the supply is connected with Australia, and
•: it is 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.

The entity sold goods to a customer, for consideration, in the course of an enterprise that it carries on and it is registered for GST. Furthermore, the supply is neither GST-free nor input taxed. Therefore, if the entity's supply is connected with Australia, it will be a taxable supply.

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 73 of the Goods and Services Tax Ruling GSTR 2003/15 provides that when a supplier causes the goods to be brought to Australia, the supplier does not import the goods into Australia where the customs formalities for the importation of the goods are completed by the entity that acquires the goods from the supplier.

The goods are sold by the entity on DEQ terms. The DEQ terms requires the customer to clear the goods for import and to pay for all formalities, duties, taxes and other charges upon import. As such, the entity does not import the goods into Australia and paragraph 9-25(3)(a) of the GST Act is not satisfied.

However, under paragraph 9-25(3)(b) of the GST Act, a supply of goods being brought to Australia is connected with Australia if the supplier installs or assembles the goods in Australia.

This provision applies broadly to circumstances where a supply of goods to Australia involves the supplier installing or assembling the goods in Australia and does not only apply to the supply of 'installed goods'. This ensures that the GST treatment of goods being brought to Australia is identical regardless of whether installed goods are supplied or the parties split the supply of the goods and the supply of installation services into separate contracts.

At a later date and before the goods were imported into Australia, both parties entered into a separate contract where the entity agreed to install the goods in Australia.

Notwithstanding that the parties enter into separate contracts, paragraph 9-25(3)(b) of the GST Act applies because the entity agrees to install, in Australia, the goods that it supplied and that were brought to Australia. As such, the supply of the goods is connected with Australia.

Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies goods, to an Australian customer, that it subsequently installs in Australia under a separate contract.

Date of decision: 8 June 2004

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   section 9-25
   subsection 9-25(3)
   paragraph 9-25(3)(a)
   paragraph 9-25(3)(b)

Keywords
Goods and services tax
GST international services
Connected with Australia
GST supplies & acquisitions
GST supply
Taxable supply

Siebel/TDMS Reference Number: 3976137

Business Line: Indirect Tax

Date of publication: 26 November 2004

ISSN: 1445-2782

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