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Edited version of your private ruling
Authorisation Number: 1012575130755
Ruling
Subject: GST and the supply of skim milk powder overseas.
Issue
Is the supply of the skim milk powder (product) by an Australian company (you) to a non-resident company (NRCo) subject to goods and services tax (GST), where you acquire the product from overseas and deliver the product outside Australia to the NRCo?
Answer
No, your supply of the product (goods) to the NRCo is not connected with Australia and is not subject to GST.
Relevant facts and circumstances
You are an Australian company. You are registered for goods and services tax (GST).
You are based in Australia, and have no entity in the overseas country.
You supply skim milk powder (product) to a non-resident company (NRCo). The sale was made in foreign currency.
You had sourced the product from another overseas company (OSCo) in the overseas country, and then sold it to NRCo. The product never came to Australia, and was delivered directly to NRCo overseas.
You confirmed that you purchased the product from OSCo and then on-sold the product to NRCo.
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 Section 9-25
Reasons for decision
GST is payable on a taxable supply. Section 9-5 of the A New Tax System (Goods and Service Tax) Act 1999 (GST Act) 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)
A supply is taxable if all the requirements of section 9-5 of the GST Act are satisfied.
One of the requirements for a taxable supply under paragraph 9-5(c) of the GST Act is that the supply is connected with Australia.
For the purposes of determining whether the supply is connected with Australia, section 9-25 of the GST Act makes a distinction between a supply of goods, a supply of real property and a supply of anything other than goods or real property.
Characterisation of the supply
The facts indicate that you supply skim milk powder (product) to NRCo.
Section 195-1 of the GST Act defines the term 'goods':
goods means any form of tangible personal property.
Goods and Services Tax Ruling GSTR 2000/31 at paragraph 44 states:
Supplies of goods
44. A supply of goods is a supply of any form of tangible personal property, that is, any form of personal property that has a physical existence but does not include intangible personal property such as intellectual property like a copyright. A supply of goods can occur by way of sale, lease, hire etc.
Your supply of the skim milk powder (product) is a tangible personal property, and therefore is a supply of goods.
Supply of goods connected with Australia
Subsections 9-25(1) to 9-25(3) of the GST Act define when a supply of goods is connected with Australia, which state:
Supplies of goods wholly within Australia
(1) A supply of goods is connected with Australia if the goods are delivered, or made available, in Australia to the *recipient of the supply.
Supplies of goods from Australia
(2) A supply of goods that involves the goods being removed from Australia is connected with Australia.
Supplies of goods to Australia
(3) A supply of goods that involves the goods being brought to Australia is connected with Australia if the supplier either:
(a) imports the goods into Australia; or
(b) installs or assembles the goods in Australia
GSTR 2000/31 explains when a supply is connected with Australia under section 9-25 of the GST Act. Paragraphs 44 to 56 of GSTR 2000/31 cover the supplies of goods, and state (at paragraphs 45, 46, 50, 52 and 54):
Supplies of goods wholly within Australia
45. A supply of goods in connected with Australia if the goods are delivered, or made available, in Australia to the recipient of the supply…
46…goods are delivered in Australia if the goods are physically delivered in Australia. Goods are made available in Australia if the goods are physically made available in Australia.
Supplies of goods from Australia
50. A supply of goods is connected with Australia, if the supply involves those goods being removed from Australia.
Supplies of goods to Australia
52. A supply of goods is connected with Australia if the supply involves those goods being brought to Australia and the supplier either imports the goods into Australia (paragraph 9-25(3)(a)) or installs or assembles the goods in Australia (paragraph 9-25(3)(b)). The import of the goods into Australia or the installation or assembly of the goods in Australia is a supply of goods to Australia.
54. Paragraph 9-25(3)(a) does not apply to a supply of goods that involves goods being brought to Australia where the recipient imports the goods into Australia.
The facts indicate that you supply the skim milk powder (product), which is a supply of goods, to NRCo (an entity outside Australia). You had acquired the product from another overseas company (OSCo) in the overseas country, and then on-sold it to NRCo. The product (goods) never came to Australia, and was delivered directly to NRCo overseas.
On the basis of these facts, the goods are not delivered, or made available, in Australia to NRCo. Further, the supply does not involve the goods being removed from Australia, and does not involve goods being brought to (or installed or assembled in) Australia, as the product never came to Australia. Accordingly, the supply of the product (goods) by you to NRCo is not connected with Australia under subsection 9-25 of the GST Act, and paragraph 9-5(c) of the GST Act is not satisfied. Hence, the supply of the goods by you to NRCo is not a taxable supply and not subject to GST.
Additional information
As the supply of the goods is not connected with Australia and is not a taxable supply under section 9-5 of the GST Act, there is no need to consider the input taxed and GST-free provisions. For your information, we note that certain milk products may be GST-free food under Subdivision 38-A of the GST Act. Refer to the GST food guide (which is available at the ATO website at www.ato.gov.au) for further information.
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