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Edited version of your private ruling
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Ruling
Subject: GST and treatment of supplies of precious metals
Question 1
Will your supplies of precious metal, after its refinement, constitute the first supply of that precious metal in accordance with paragraph 38-385(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes, your supplies of precious metal, after its refinement will constitute the first supply of that precious metal in accordance with paragraph 38-385(a) of the GST Act.
Question 2
If the answer to question 1 is yes, will your supplies satisfy the other requirements of section
38-385 of the GST Act to make the supplies GST-free?
Answer
Yes, your supplies will satisfy the other requirements of section 38-385 of the GST Act to make the supplies GST-free.
Question 3
Will you be entitled to the full input tax credits incurred through the business process in making the above supplies?
Answer
You will be entitled to full input tax credits where you make creditable acquisitions through the business process in making your GST-free supplies.
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You will purchase gold and silver in a variety of forms.
Another entity will manage all activities associated with the refining and sale process of your metals.
The gold and silver will be refined to London Good Delivery Standard (such that the refined metals will satisfy the definition of precious metals in section 195-1 of the GST Act).
You confirm that your supplies of precious metal will only be made to dealers in precious metal.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 11-5
A New Tax System (Goods and Services Tax) Act 1999 section 11-15
A New Tax System (Goods and Services Tax) Act 1999 section 11-20
A New Tax System (Goods and Services Tax) Act 1999 section 38-385
A New Tax System (Goods and Services Tax) Act 1999 section 195-1
Question 1
Detailed reasoning
Section 38-385 of the GST Act states:
A supply of *precious metal is GST-free if:
(a) it is the first supply of that precious metal after its refining by, or on behalf of, the supplier; and
(b) the entity that refined the precious metal is a *refiner of precious metal; and
(c) the *recipient of the supply is a *dealer in precious metal.
(* denotes a term defined in section 195-1of the GST Act)
Goods and Services Tax Ruling GSTR 2003/10 provides guidance on what is precious metal for the purposes of GST. It provides, at paragraph 7, that the first supply of precious metal after its refining may be GST-free under section 38-385 of the GST Act and apart from transactions that fall within the ambit of section 38-385 of the GST Act, supplies of precious metals are input taxed under section 40-100 of the GST Act.
Precious metal is defined in section 195-1 as follows:
precious metal means:
(a) gold (in an investment form) of at least 99.5% fineness; or
(b) silver (in an investment form) of at least 99.9% fineness; or
(c) platinum (in an investment form) of at least 99% fineness; or
(d) any other substance (in an investment form) specified in the regulations of a
particular fineness specified in the regulations.
GSTR 2003/10 also explains the ATO view on what is in an investment form.
You have confirmed that the refined metals you are supplying satisfy the definition of precious metals in section 195-1 of the GST Act.
You will send your metal to a refinery to be refined to London Good Delivery Standard.
The metal is being refined on your behalf. You will retain legal title of the metals from the time you purchase them until you sell them.
As such, your supply of the precious metal after its refinement into a precious metal will be the first supply in accordance with paragraph 38-385(a) of the GST Act.
Question 2
Detailed reasoning
Section 195-1 of the GST Act defines 'refiner of precious metal' as follows:
refiner of precious metal means an entity that satisfies the Commissioner that it regularly converts or refines *precious metal in *carrying on its *enterprise.
The refiner is accredited with the London Bullion Market Association and will refine your metal to London Good Delivery Standard.
The Commissioner is satisfied that the Refiner regularly converts or refines precious metal in carrying on its enterprise and is a refiner of precious metal.
As such, paragraph 38-385(b) of the GST Act is satisfied.
Section 195-1 of the GST Act defines 'dealer in precious metal' as:
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.
Your supplies of precious metal will only be made to dealers in precious metal.
The Commissioner is satisfied that the recipients of your supplies are dealers in precious metal.
As such, paragraph 38-385(c) of the GST Act is satisfied.
Consequently, your supplies will satisfy the other requirements of section 38-385 of the GST Act.
Question 3
Detailed reasoning
Under section 11-20 of the GST Act, you are entitled to an input tax credit for any creditable acquisition that you make.
Section 11-5 of the GST Act states:
You make a creditable acquisition if:
(a) you acquire anything solely or partly for a *creditable purpose; and
(b) the supply of the thing to you is a *taxable supply; and
(c) you provide, or are liable to provide, *consideration for the supply; and
(d) you are *registered, or *required to be registered.
Section 11-15 of the GST Act provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise.
You have advised that another entity will manage all activities associated with the refining and sale process of your metals. It will charge you a management fee for this.
You acquire these services in carrying on your enterprise. You are registered for GST and provide consideration for these services. If the supply is a taxable supply to you, you will be entitled to input tax credits for your acquisitions of these services.
Where you make creditable acquisitions through the business process in making your GST-free supplies, you will be entitled to input tax credits.
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