Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012407529471

Ruling

Subject: Goods and services tax (GST) and reverse charging

Question 1

Has Entity 1 made taxable supplies of its business services that were connected with Australia?

Answer

Yes.

Question 2

If Entity 1 has made taxable supplies of the business services that were connected with Australia and its customer has also accounted for the acquisition of these services under Division 84 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), such that the Commissioner has received two amounts for the same supply, is Entity 2 entitled to a refund of GST?

Answer

No.

Relevant facts and circumstances

Entity 1 is incorporated in an overseas country.

Entity 1 is registered for GST.

Entity 1 is a member of a GST group. The representative member of this GST group is Entity 2, a wholly owned subsidiary of Entity 1.

Entity 1 is a global services company. It specialises in services to a certain sector.

Entity 1 has entered into arrangements with a number of Australian clients for the provision of certain things and business services including the following:

Entity 1 has received consideration for these supplies.

The supplies in question are the supplies of business services that were provided by consultants in Australia. Entity 1 organises the performance of these services by consultants of Entity 1, Entity 2 or other related non-resident something companies.

Entity 1's major (number) customers (including Entity 3) are entities that make supplies for a non-creditable purpose and are therefore not entitled to claim full input tax credits on a significant number of their acquisitions, including their acquisitions of services from Entity 1.

Entity 1 has supplied business services to these customers. Some of the business services were provided by consultants in Australia.

Entity 2 does not act as a resident agent for Entity 1. Entity 2 does not enter into business service contracts with Entity 1's customers on behalf of Entity 1 thereby binding Entity 1 to its customers. Instead Entity 1 enters into its business service contracts with its customers directly.

Entity 2 has paid GST to the Australian Taxation Office (ATO) on the supplies of the business services that were provided in Australia.

Entity 3 has also paid GST to the ATO on the supplies of the business services that were provided in Australia based on the belief that these supplies were subject to the reverse charging requirement of Division 84 of the GST Act.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

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 paragraph 9-25(5)(a)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-25(5)(c)

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

A New Tax System (Goods and Services Tax) Act 1999 subsection 48-40(1)

A New Tax System (Goods and Services Tax) Act 1999 section 83-5

A New Tax System (Goods and Services Tax) Act 1999 section 84-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 84-10(1)

Taxation Administration Act 1953 section 8AAZLH

Reasons for decisions

Question 1

Summary

Entity 1's supplies of the business services in question were taxable supplies because:

Detailed reasoning

You make a taxable supply where you satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

You make a taxable supply if:

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

or *input taxed.

(*Denotes a term defined in section 195-1 of the GST Act)

Entity 1's supplies of the business services in question satisfied the requirements of paragraphs 9-5(a), 9-5(b) and 9-5(d) of the GST Act. This is because:

There are no provisions in the GST Act under which Entity 1's supplies of the business services were GST-free or input taxed.

Therefore, what remains to be determined is whether Entity 1's supplies of the business services that were provided by consultants in Australia were supplies connected with Australia.

Subsection 9-25(5) of the GST Act states:

A supply of anything other than goods or *real property is connected with

Australia if:

(a) the thing is done in Australia; or

(b) the supplier makes the supply through an *enterprise that the supplier

carries on in Australia; or

(c) all of the following apply:

Services are not goods or real property.

Therefore, a supply of services is connected with Australia if the requirements of subsection 9-25(5) of the GST Act are satisfied. Subsection 9-25(5) of the GST Act states:

Paragraph 65 of Goods and Services Tax Ruling GSTR 2000/31 states:

Hence, Entity 1 made taxable supplies of the business services that were provided by consultants in Australia, as all of the requirements of section 9-5 of the GST Act are satisfied.

Question 2

Summary

Entity 2 is not entitled to a refund of the GST it paid to the ATO, as it correctly paid GST to the ATO.

Entity 2 is not entitled to a refund of the GST Entity 1's customers paid to the ATO as Entity 2 did not pay these amounts to the ATO.

Detailed reasoning

GST is payable by an entity on taxable supplies that it makes.

However, subsection 48-40(1) of the GST Act provides that the GST payable on a taxable supply that a member of GST group makes is payable by the representative member of the GST group.

Subsection 84-10(1) of the GST Act provides a reverse charging rule for offshore intangible supplies. It states:

The GST on a supply that is a *taxable supply because of section 84-5:

is payable by the *recipient of the supply; and

is not payable by the supplier.

Section 84-5 of the GST Act states:

A supply of anything other than goods or *real property that is:

for the purpose of an *enterprise that the recipient *carries on in Australia, but not solely for a *creditable purpose; and

Entity 1's supplies of the business services that were provided in Australia were connected with Australia, but not because of paragraph 9-25(5)(c) of the GST Act. Therefore, subsection 84-10(1) of the GST Act does not apply to the situation in question. Hence, the GST payable on the supplies of the business services is not reverse charged under subsection 84-10(1) of the GST Act.

Section 83-5 of the GST Act also contains a reverse charging rule. It states:

(1) The GST on a *taxable supply is payable by the *recipient of the supply, and is

not payable by the supplier, if:

(2) However, this section does not apply to:

offshore).

Entity 1 and Entity 3 have not agreed that Entity 3 would pay the GST on any of the supplies in question. Entity 2 has paid GST on the supplies in question. Therefore, section 83-5 of the GST Act does not apply.

As the requirements of section 9-5 of the GST Act are satisfied and reverse charging does not apply and the representative member of the something GST group is Entity 2, GST was payable by Entity 2 on the supplies of the business services that were provided in Australia.

Entity 2 is not entitled to a refund of the GST it has paid to the ATO as Entity 2 was liable to pay that GST.

Entity 2 is not entitled to a refund of the GST that Entity 3 (or any other customer of Entity 1) has incorrectly paid to the Tax Office, as Entity 2 did not pay these incorrectly paid GST amounts.

We can't advise the ruling applicant whether Entity 1's customers or any other entities other than something GST group members are entitled to refunds because that concerns the tax affairs of taxpayers that the ruling applicant does not represent.

It is the entity that incorrectly pays GST to the ATO that is entitled to a refund from the ATO, subject to the 4 year time limitation.


Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).