Edited version of private ruling

Authorisation Number: 1011585313347

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Ruling

Subject: GST and supply of services

Question

Is your supply of services under the contract a taxable supply?

Answer

No, your supply of services under the contract is not a taxable supply.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an Australian company and you are registered for goods and services tax (GST).

You entered into a contract with another Australian resident entity to provide services to another entity outside Australia.

The services are for the repair, maintenance and support for goods situated outside Australia.

The services will be performed outside Australia.

You will provide the services for consideration.

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 subsection 9-25(5)

A New Tax System (Goods and Services Tax) Act 1999 subsection 9-30(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-190(4)

A New Tax System (Goods and Services Tax) Act 1999 subsection 195-1

Reasons for Decision

GST is payable on taxable supplies. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a supply is taxable 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.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

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

In order that the supply be a taxable supply it must satisfy paragraphs 9-5(a), (b), (c) and (d) of the GST Act.

In your case you will make the supply for consideration and in the course of your enterprise. You are registered for GST. Therefore, paragraphs 9-5(a), (b) and (d) of the GST Act are satisfied.

Under paragraph 9-25(5)(b) of the GST Act, the supply will be connected with Australia because you will make the supply through an enterprise that you carry on in Australia although the supply will be performed outside Australia. As such, paragraph 9-5(c) of the GST Act is also satisfied. Therefore, the supply is a taxable supply unless it is GST-free or input taxed.

The supply is not input taxed under any provision of the GST Act.

Therefore, it must be determined whether the supply will be GST-free.

Whether your supply is GST-free

Paragraph 9-30(1)(a) of the GST Act provides that a supply is GST-free if it is GST-free under Division 38 of the GST Act, or under a provision of another Act.

Subdivision 38-E of the GST Act provides that, if certain conditions are satisfied, a supply of exports or other supplies for consumption outside Australia will be GST-free.

Section 38-190 of the GST Act deals with supplies of things, other than goods or real property, for consumption outside Australia.

Item 3 in the table at subsection 38-190(1) of the GST Act provides that supplies to be used or enjoyed outside Australia, except to the extent that they are supplies of goods or *real property, are GST-free if the supply is:

a supply:

(a) that is made to a *recipient who is not in Australia when the thing supplied is done; and

(b) the effective use or enjoyment of which takes place outside Australia; other than a supply of work physically performed on goods situated in Australia when the thing supplied is done, or a supply directly connected with real property situated in Australia.

Furthermore, subsection 38-190(4) of the GST Act provides that:

A supply is taken, for the purposes of item 3 in that table, to be a supply made to a *recipient who is not in Australia if:

(a) it is a supply under an agreement entered into, whether directly or indirectly, with an *Australian resident and

(b) the supply is provided, or the agreement requires it to be provided, to another entity outside Australia.

Goods and Services Tax Ruling GSTR 2007/2 examines the circumstances in which the effective use or enjoyment of a supply takes place outside Australia.

Paragraphs 40 and 41 of GSTR 2007/2 provide the following in determining the entity that has the actual use or enjoyment of the supply:

40. The requirement in paragraph (a) of item 3 refers to the recipient of the supply. The recipient of the supply is the entity to which the supply is made. A supply that is made to a recipient entity may be provided to another entity. If a supply is made to a recipient and provided to another entity, the entity that actually uses or enjoys the supply is that other entity. For example, if a supply of travel services is made to a company (recipient) and the travel is undertaken by an employee of the recipient, the supply is provided to the employee and it is the employee that actually uses or enjoys the supply.

41. A supply is made to a recipient and provided to another entity if in the performance of a service (or in the doing of some thing) the actual flow of that supply is to an entity that is not the recipient entity with which the supplier made the agreement for the supply. That is, while the contractual flow of the supply is to the recipient entity, the actual flow of the supply is to another entity.

Furthermore, paragraphs 44 and 45 of GSTR 2007/2 provide the following in determining if the supply made is for consumption outside Australia:

44. Both the heading to section 38-190 and the table in subsection 38-190(1) refer to '[s]upplies of things...for consumption outside Australia'. Thus in the context of subsection 38-190(1) use or enjoyment of a supply takes place outside Australia if the supply is for consumption by an entity outside Australia.

45. In our view, a supply is for consumption, and thus used or enjoyed, outside Australia if there is provision of the supply to the providee entity outside Australia.

Based on the information provided, you have entered into a contract with an Australian resident, to provide services to another entity outside Australia. Furthermore, the services do not involve work physically performed on goods situated in Australia or is directly connected with real property situated in Australia.

Accordingly, we consider that your supply will meet all the requirements of subsections 38-190(1)(3) of the GST Act and 38-190(4) of the GST Act and is therefore GST-free and not a taxable supply.

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