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Authorisation Number: 1012315661997
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Ruling
Subject: GST and supply to non-resident entity
Question
Is your supply of services to the non-resident entity a taxable supply?
Answer
No, your supply of services to the non-resident entity is not a taxable supply.
Relevant facts and circumstances
You are registered for goods and services tax (GST).
You provide services to a non-resident entity that purchases goods from wholesalers in Australia.
The non-resident entity is not registered or required to be registered for GST.
Your services include translation of orders and emails, monitoring of the progress of orders and their quality, arranging payments, packaging the goods and organising shipment.
The only activity done by the non-resident entity in Australia is the purchase of the goods. It does not sell the goods in Australia.
You pick up the goods from the wholesalers and take them to your storage facilities. You package them in large boxes and organise for a freight forwarder to collect the boxes and put them in a freight container ready for shipping.
You on-charge the freight costs to the non-resident.
You attend to customs formalities as the exporter of the goods with your name indicated as the shipper and the non-resident as the consignee.
The non-resident does not have a representative, agent or an employee in Australia in relation to your supply of services.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5 and
A New Tax System (Goods and Services Tax) Act 1999 section 38-190.
Reasons for decision
GST is payable on a taxable supply.
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (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.
(* denotes a term defined in section 195-1 of the GST Act).
However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.
You make the supply of your services for consideration and in the course of your enterprise. The supply is connected with Australia; and you are registered for GST. As the requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act are satisfied, the supply of your services to the non-resident is a taxable supply unless it is GST-free or input taxed.
There is no provision in the GST Act under which the supply of your services is input taxed. Therefore, we must determine whether the supply is GST-free.
The table in subsection 38-190(1) of the GST Act sets out supplies of things, other than goods or real property, which are GST-free. In particular, item 2 in the table (item 2) provides that a supply is GST-free if it is a supply that is made to a non-resident who is not in Australia when the thing supplied is done, and:
· 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
· the *non-resident acquires the thing in *carrying on the non-resident's *enterprise, but is not *registered or *required to be registered.
(*denotes a term defined in section 195-1 of the GST Act)
Non-resident not in Australia
Good and Services Tax Ruling GSTR 2004/7 explains when an entity is 'not in Australia' or is 'outside Australia' when the thing supplied is done. According to paragraph 37 of GSTR 2004/7, a non-resident company is in Australia if that company carries on business in Australia:
· at or through a fixed and definite place of its own for a sufficiently substantial period of time; or
· through an agent at a fixed and definite place for a sufficiently substantial period of time.
You advised that the non-resident does not have any activity in Australia other than purchasing the goods. The non-resident is based overseas. It does not have any agent, representative or employee in Australia when you supply your services. Thus, the non-resident is not in Australia when the thing that you supply is done.
Supply is neither a supply of work physically performed on goods nor a supply directly connected with real property in Australia
Goods and Services Tax Ruling GSTR 2003/7 examines the meaning of the expression 'a supply of work physically performed on goods'.
According to paragraph 58 of GSTR 2003/7, a supply is a supply of work physically performed on goods where something is done deliberately to the goods to change them or to otherwise affect them in some physical way.
Paragraph 59 of GSTR 2003/7 further provides that where activities do not change or affect the goods in a physical way, there is no supply of work physically performed on goods. For example, a supply of transporting goods is not work physically performed on goods because the supply only changes the location of the goods, not the goods themselves.
Your services of translating orders and emails, monitoring of the progress of orders and their quality, arranging payments and packaging do not change or affect the goods in some physical way. Therefore, your supply of services to the non-resident is not a supply of work physically performed on goods.
'Real property' is defined in section 195-1 of the GST Act to include any interest in or right over land, a personal right to call for or be granted any interest in or right over land, or a licence to occupy land or any other contractual right exercisable over or in relation to land. Your services are not connected, directly or indirectly, with real property situated in Australia.
As your supply of the other services is neither a supply of work physically performed on goods nor a supply directly connected with real property in Australia, paragraph (a) in item 2 is satisfied.
Non-resident acquires the thing in carrying on its enterprise, but is not registered or required to be registered
You advised that the non-resident purchases the goods from Australia and sell them. It does not sell the goods in Australia and its only activity in Australia is the purchase of the goods. It acquires your services in carrying on its business. The non-resident is not registered for GST; and based on the information provided it is not required to be registered. As such, paragraph (b) in item 2 is also satisfied.
Your supply of the other services to the non-resident is not a taxable supply. It is a GST-free supply under either paragraph (a) or paragraph (b) in item 2.
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