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Edited version of private ruling
Authorisation Number: 1011601217020
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Ruling
Subject: goods and services tax (GST) and services supplied to overseas entity
Is GST payable on your supplies of the services to X?
Yes.
Relevant facts and circumstances
You are registered for GST.
You carry out contracts for an overseas company called X which is a worldwide consulting company. You visit companies in Australia on behalf of X and give advice and strategies and work with the Australian companies on business improvements looking at mostly manufacturing processes and lines and how they can be improved.
You advised that your agreement with X requires you to provide your services to specific entities/customers in Australia.
You provided a contract to the Australian Taxation Office that is stated to be between Y (an individual) and X. You advised that Y entered into this contract on your behalf. The contract provides the following:
X is engaged in the business of management consultancy services, specifically in a particular field.
Y is required to support X in order to:
· develop the knowledge and implementation of certain things
· promote consulting services for international clients in these domains into …. and a certain region.
The providee entities (in relation to your services) are listed in your contract with X.
X does not have a presence in Australia.
Reasons for decision
Summary
GST is payable on your supplies of the services to X as your supplies of these services satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Detailed reasoning
GST is payable on taxable supplies.
You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states:
You make a taxable supply 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 defined term in section 195-1 of the GST Act.)
In your case, your supplies of services to X satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, these supplies are made for consideration and in the course or furtherance of the enterprise that you carry on. These supplies are connected with Australia as the services supplied are done in Australia and made through an enterprise that you carry on in Australia. Further, you are registered for GST.
However, your supplies of the services to X will not be taxable supplies to the extent that they are GST-free or input taxed. There are no provisions in the GST Act or in any other Act under which your supplies of these services are input taxed. Therefore, what remains to be determined is whether your supplies of services to X are GST-free.
GST-free
We shall now consider whether your supplies of services to X are GST-free under Item 2 in the table in subsection 38-190(1) of the GST Act (item 2). Item 2 states:
Item |
Topic |
These supplies are GST-free (except to the extent that they are supplies of goods or real property) |
2 |
Supply to non-resident outside Australia |
a supply that is made to a non-resident who is not in Australia when the thing supplied is done, and: (a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with real property situated in Australia; or (b) the non-resident acquires the thing in carrying on the non-residents enterprise, but is not registered or required to be registered. |
Item 2
Your supplies of services to X are supplies other than supplies of goods or real property.
For a supply to be within the scope of Item 2, the supply must be made to a non-resident who is not in Australia when the thing supplied is done.
Paragraph 31 of Goods and Services Tax Ruling GSTR 2004/7 (GSTR 2004/7) states:
31. The requirement that the non-resident in item 2, or the recipient in item 3, is not in Australia when the thing supplied is done is a requirement, in our view, that the non-resident or recipient is not in Australia in relation to the supply when the thing supplied is done.
Paragraph 41 of GSTR 2004/7 states:
41. A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor.
Your customer in question, X is a non-resident company and it does not have a presence in Australia. Hence, X is not in Australia in relation to your supply to it when you perform your services.
Additionally, your supplies to X are neither supplies of work physically performed on goods situated in Australia when the work is done nor supplies directly connected with real property situated in Australia.
As item 2 (a) is satisfied, there is no need to consider item 2(b).
However, the scope of item 2 is limited by subsection 38-190(3) of the GST Act which provides that a supply covered by Item 2 is not GST-free if:
· it is a supply under an agreement entered into, whether directly or indirectly with a non-resident; and
· the supply is provided or the agreement requires it to be provided to another entity in Australia.
In this case, subsection 38-190(3) of the GST Act is applicable as you make supplies under an agreement entered into with a non-resident and you advised us that these supplies are provided to other entities in Australia.
Therefore, your supplies of services to X are not GST-free under item 2.
There are no other items in the table in subsection 38-190(1) of the GST Act or other provisions in the GST Act or in any other Act under which your supplies of services to X are GST-free. Therefore, as all of the requirements of section 9-5 of the GST Act are satisfied, GST is payable on your supplies of services to X.
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