Edited version of private ruling

Authorisation Number: 1011475415289

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Ruling

Subject: GST precious metals and sales of relevant products

Questions:

Are you importing and selling 'precious metals' in relation to the relevant products for the purposes of section 38-385 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Are the importation and sales of the relevant products by you to customers in Australia and overseas GST-free supplies of precious metals under section 38-385 of the GST Act?

Are the sales of the relevant products by you to customers outside Australia GST-free exports under section 38-185 of the GST Act?

Advice/Answers:

No. You are not importing and selling precious metals in relation to the relevant products for the purposes of section 38-385 of the GST Act.

No. Your importation and sales of the relevant products to customers in Australia and overseas are not GST-free supplies of precious metals under section 38-385 of the GST Act.

Yes, your sales of the relevant products to customers outside Australia are GST-free exports under section 38-185 of the GST Act, where the relevant products are exported from Australia within the 60-day period.

Relevant facts:

You (an Australian company) are a supplier/wholesaler of precious metal bars/wafers, for the purposes of investments.

You are registered for goods and services tax (GST).

As importers you distribute the products to wholesale and retail buyers in Australia and certain overseas regions.

You will also import relevant products into Australia that you will sell to customers (investors) in Australia and will also export to overseas customers.

Details of the relevant products were provided.

Payment for the relevant products would be for the relevant precious metal content based on international prices not the small amount of other material used to make the product more durable. Buyers pay for the relevant precious metal content with a small premium for labour and distribution costs.

You will not purchase the relevant products from a secondary market. You are the first purchaser of the relevant products from the refiner. The relevant products will be freshly created ready for export after an order is placed. You have been informed by the refinery themselves of this procedure.

The relevant products are not purchased for collection purpose, rarity or condition. The relevant products may be considered legal tender in the country where they are created.

Your import agent in Australia is well known in the industry. Insurance during transport and vaulting services will be provided by this agent.

A summary of the order procedures was provided.

The relevant products are in small sizes and prices would be based on the international prices.

The supply and acquisition of the relevant products form a part of your business activities of selling precious metals.

This ruling does not address taxable importation.

Reasons for decisions:

Question 1

The term 'precious metal' is defined in section 195-1 of the GST Act:

'precious metal' means:

· gold (in an investment form) of at least 99.5% fineness; or

· silver (in an investment form) of at least 99.9% fineness; or

· platinum (in an investment form) of at least 99% fineness; or

· any other substance (in an investment form) specified in the regulations of a particular fineness specified in the regulations.

Goods and Services Tax Ruling GSTR 2003/10 (GSTR 2003/10) covers precious metal for GST purposes. At paragraph 9 of GSTR 2003/10 it states that no regulations have been made to specify any other substance. To be precious metal for GST purposes, the metal must therefore be gold, silver or platinum and of a specified fineness.

Metal gold

In this case, the relevant products are made of the metal gold (and a small percentage of other material).

To be the metal gold, the item must have the character of the metal rather than the character of a thing made from the metal.

A factor that can point to whether something has lost its character as the metal gold is whether it is traded at a price that is determined by reference to the prevailing spot price for the metal. If something is not usually traded at a price determined by reference to the prevailing spot price of its metal content it is not being traded for its metal value only. For example, proof products are traded at a price that reflects the quality of the finish over and above what is necessary to trade the metal value.

From the facts given, when you purchase the relevant products they are based on prices set internationally. Further when you sell them to your customers, they are based on those prices as well.

Therefore, the relevant products have the character of metal gold.

Investment form

What is 'in an investment form' is not defined in the GST Act, it will therefore takes it ordinary meaning. The expression is covered under paragraphs 14 to 28 of GSTR 2003/10.

A summary of what is in an investment form is stated at paragraph 29 of GSTR 2003/10 which states:

29. To summarise the above, for gold, silver or platinum to be in an investment form for the purposes of the GST Act, it must be in a form that:

· is capable of being traded on the international bullion market, that is, it must be a bar, wafer or product;

· bears a mark or characteristic accepted as identifying and guaranteeing its fineness and quality; and

· is usually traded at a price that is determined by reference to the spot price of the metal it contains.

The relevant products are 'in an investment form' because:

· they are in tradeable form - A relevant product has a small physical form in which the gold is capable of being traded on the international bullion market for the metal gold;

· they bear the accepted mark or characteristic - The relevant products are stamped which are accepted in the market as identifying its fineness and quality of the metal;

· the price determined by the spot price - The relevant products are traded by reference to the spot price for the time they are traded.

Therefore, the relevant products are considered to be gold in the investment form. However, the definition of precious metal requires that the gold in investment form must be of a specified fineness.

Specified fineness

The definition of 'precious metal' requires that the gold (in an investment form) be of at least 99.5% fineness.

Although the relevant products are traded on the international bullion market in the form of a small item, bear a characteristic identifying their quality, and are traded at a price determined by the spot price of gold, the fineness of the products is less than the required fineness to meet the definition of precious metal.

Accordingly, the relevant products are not precious metals as defined, and you are not importing and selling precious metals for the purposes of section 38-385 of the GST Act.

Question 2

Section 38-385 of the GST Act states:

A supply of *precious metals is GST free if:

· it is the first supply of that precious metal after its refining by, or on behalf of, the supplier; and

· the entity that refined the precious metal is a *refiner of precious metal; and

· the recipient of the supply is a *dealer in precious metals.

(* denotes a defined term under section 195-1 of the GST Act)

Section 195-1 of the GST Act defines a 'refiner of precious metal' to mean 'an entity that satisfies the Commissioner that it regularly converts or refines precious metal in carrying on its enterprise'. Further, a 'dealer in precious metal' means an 'entity that satisfies the Commissioner that a principal part of carrying on its enterprise is the regular supply and acquisition of precious metal'.

As discussed in Issue 1 above, the relevant products do not satisfy the definition of precious metal for the purposes of section 38-385 of the GST Act. Therefore, even if you satisfy the other requirements, the importation and sales of the relevant products by you to the customers in Australia and overseas are not GST-free supplies of precious metals under section 38-385 of the GST Act.

Further, it is noted that since the relevant products do not satisfy the definition of precious metal in section 195-1 of the GST Act, the sale of the relevant products is also not input taxed under section

40-100 of the GST Act.

Question 3

GST is payable on a taxable supply. Section 9-5 of the GST Act states:

You make a taxable supply if:

· you make the supply for ^*consideration; and

· the supply is made in the course or furtherance of an ^*enterprise that you ^*carry on; and

· the supply is ^*connected with Australia; and

· 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 defined term under section 195-1 of the GST Act)

From the facts given, you satisfy all the conditions of paragraphs 9-5(a) to (d) of the GST Act, as follows:

· you make the supply of relevant products (goods) to customers in return you receive consideration for the supply by way of payment(s);

· you make the supply in the course or furtherance of your business;

· the supply involves goods being made available in, or removed from, Australia (and therefore the supply is connected with Australia); and

· you are registered for GST in Australia.

Hence, your supply of relevant products to a customer is taxable to the extent that it is not GST-free or input taxed.

From the facts given, your supply of the relevant products does not satisfy the input taxed provisions under the GST Act, and is not GST-free under section 38-385 of the GST Act (as discussed in Question 2 above). The GST-free export of goods is considered below.

Note the supply of the relevant products is a supply of goods and not a supply of money. The principle is taken from Allgemeine Gold und Silberscheideanstalt vs Customs and Excise Commissioners [1980] QB 390, where the main reason given for the classification as goods was that relevant products "were used and valued according to the substance they contained, rather than their face value as an instrument of exchange, and that substance, ie. gold clearly amounted to goods". That is, the gold products were valued based on relevant precious metal content, rather than their face value.

Section 38-185 and GST-free exportation

Section 38-185 of the GST Act discusses the GST-free exports of goods. Specifically, item 1 in the table in subsection 38-185(1) of the GST Act (Item 1) is relevant in this circumstance, which states:

Please note that an 'invoice' does not have to be a tax invoice.

Accordingly, your sales of the relevant products will be GST-free if all the conditions of Item 1 above are satisfied.

Goods and Services Tax Ruling GSTR 2002/6 discusses the export of goods. At paragraphs 20 to 51 of GSTR 2002/6, they describe the requirements of Item 1.

Under Item 1, a supply of goods is GST-free where the supplier exports them from Australia and the export occurs before, or within a 60 day period (or such further period as the Commissioner allows).

Therefore, the supply of the relevant products by you to a customer outside Australia is GST-free, where you export the products from Australia before or within 60 days after the earlier of consideration being received, or an invoice being issued.

In summary,

The supply of the relevant products to a customer in Australia is a taxable supply.

The supply of the relevant products to a customer outside Australia which is exported within the

60-day period is GST-free.

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