Edited version of your private ruling

Authorisation Number: 1012594048734

Ruling

Subject: GST and precious metals

Questions

1. Is the supply of the custom stamped bullion bars by entity A to entity B a precious metal for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

2. Is the supply of the custom stamped bullion bar (the XYZ Bullion) by entity A to entity B a taxable supply under section 9-5 of the GST Act?

3. Is the supply of other custom made bullion products by entity A, such a coins and rounds stamped with special mouldings, a taxable supply under section 9-5 of the GST Act?

4. Is the supply by entity A of a palladium coin, round or bullion products a taxable supply under section 9-5 of the GST Act?

Answers

1. No

2. Yes

3. Yes

4. Yes

Relevant facts and circumstances

· Entity A provides customised gold, silver, platinum and palladium for collectible, religious, personal or fundraising purposes.

· Entity A is registered for GST.

Purchase of bullion by entity A

· Entity A purchases bullion from an entity (entity C).

· The bullion acquired by entity A from entity C can be standard bullion or customised bullion product.

· All entity C bullion products bear an industry accepted mark of the relevant metal as standard. Such bullion is known as 'standard bullion'.

· 'Customised bullion' allows the bullion to be designed and minted with personalised features such as company logo's, family crests, emblems or engravings.

· Standard and customised bullion are not types of bullion that are listed in the Industry Catalogue of Gold Bars Worldwide.

· Customised bullion is acquired by entity A from entity C for the purpose of resale by entity A to its customers.

· Entity A and entity C have negotiated that the price, referred to as the 'entity C total invoice price', for the customised bullion is determined by the market daily metal spot price plus a manufacturing charge.

· A representative tax invoice issued by entity C to entity A shows that the entity C total invoice price for the acquisition of the customised bullion does not include GST.

Supply of customised bullion to entity B

· Entity A and entity B have entered into an arrangement where entrity A will supply customised bullion (named the 'XYZ Bullion') to entity C. The XYZ Bullion is designed and produced to reflect entity B's purposes.

· Entity B will sell the XYZ Bullion (acquired from entity A) as fundraising items to generate revenue for its purposes.

· Entity A has negotiated a sell price with entity B. The parties have agreed that the sell price, referred to as the 'entity A invoiced price', will be equal to the entity B total invoice price plus an additional 10% mark up.

· Entity A will issue a tax invoice for their supply of the XYZ Bullion to entity B.

Supply of other customised products

· Entity A also purchases from entity B a range of customised precious metal products (bars and rounds) that are minted/moulded with Verses or other special stampings. These items are not created by entity A as part of a customised product development process involving the product being designed for a particular customer (such as the entity B arrangement explained above). Rather these types of bars and rounds are designed by entity A for resale to its customers generally.

· These items are supplied by entity A as a 'bulk generic' and not boxed or presented in any particular way outside of the standard plastic airtight and transit/freight packaging.

· Entity B is about to start manufacture of various bullion (gold, silver, platinum) bars with the entity A stamp/brand on one end of the bar. This stamp is currently being made and a sample of the anticipated stamp and design of bullion has been provided as part of this ruling request.

· The face of the bullion will carry the hallmark features of entity B (i.e. mark, metal type, ounce weight and fineness) on one end. The entity A Stamp/brand will be minted into the other the other end of the bullion.

· Entity A retails these customised items to their customers at a set price. That is, although the metal value spot price may influence the amount charged by entity B to entity A, this price does not determine the amount charged by entity A to a customer.

· The entity A sell price is not regulated by or in accordance with the spot price or market premium on a daily basis. In effect entity A may charge a greater margin markup than what the industry may deem as a recognised premium at that time.

· Many factors contribute to the entity A sell price such as the customised nature of the item as well as market availability of metals and religious collectibles in particular.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 s40-100

Reasons for decision

Section 9-5 of the GST Act provides that you make a taxable supply where the following requirements are met:

· you make a supply for consideration;

· the supply is made in the course or furtherance if an enterprise that you carry on;

· the supply is connected with Australia; and

· you are registered or required to be registered for GST.

However you do not make a taxable supply to the extent a supply if GST-free or input taxed.

There are two provisions in the GST Act that are relevant to the supply of precious metals. These are section 38-385 and 40-100 of the GST Act which respectively state:

38-385 Supplies of precious metals

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.

40-100 Precious metals

A supply of *precious metal is input taxed.

(an * refers to a term which is defined in section 195-1 of the GST Act)

In this case section 38-385 of the GST Act does not apply to entity A as they are not a refiner of precious metal. Accordingly what needs to be considered is whether the supply will be input taxed in accordance with section 40-100 of the GST Act.

To be considered an input taxed supply it must be established that the supply falls within the meaning of a 'precious metal' for the purposes of the GST Act. Section 195-1 of the GST Act defines the term 'precious metal' 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.

Goods and services tax ruling, GSTR 2003/10 considers what is a 'precious metal' for the purposes of the GST Act and discusses when gold, silver or platinum are in 'an investment form' for the purpose of the definition of precious metal. Relevantly paragraph 9 states:

9. No regulations have been made to specify any other substance. To be precious metal for GST purposes, the metal must therefore be gold, silver or platinum.

Consistent with paragraph 9 above the supply of palladium will not fall within the meaning of a precious metal. Accordingly the supply by entity A of palladium coins, rounds and bullion will be considered a taxable supply for the purposes of section 9-5 of the GST Act.

However in respect of a metal which is gold, silver or platinum paragraph 11 and 12 of GSTR 2003/10 state:

11. To be the metal gold, silver or platinum, the item must have the character of the metal rather than the character of a thing made from the metal. Items such as jewellery that happen to be made of gold, silver or platinum are not gold, silver or platinum for the purposes of the definition of precious metal in the GST Act. They no longer have the character of the metal gold, silver or platinum. They have the character of jewellery made from gold, silver or platinum. They are therefore not precious metal for the purposes of the GST Act.

12. A factor that can point to whether something has lost its character as the metal gold, silver or platinum is whether it is traded at a price that is determined by reference to the prevailing spot price for the metal. If something is not usually traded at a price determined by reference to the prevailing spot price of its metal content it is not being traded for its metal value only. This suggests that it does not have the character of the relevant metal. It has another character. An example is proof coins. As noted at paragraph 38, proof coins are traded at a price that reflects the quality of the finish over and above what is necessary to trade the metal value. The price is not determined solely by the metal value of the coin. The price is determined by reference to the spot price and by reference to the quality of the physical characteristics of the coin. The latter indicates that proof coins are not traded for the metal value only and therefore indicates that they do not have the character of the metal, but rather the character of manufactured articles, that is, coins made from the metal. This means that proof coins are not precious metal.

In this case entity A will supply the XYZ Bullion to entity B and other customised bullion products (such as rounds and coins) to their clients. For the supply of the XYZ Bullion entity A receives consideration (i.e. payment for the bullion) from entity B. This is equal to its cost to acquire the customised bullion from entity B (i.e. the entity B total invoice price) plus a markup. Similarly, for the other customised bullion products entity A will receive consideration based on a set price. In both cases the amount received by entity A will be above the prevailing spot price of the metal content.

Consistent with principle set out in paragraph 12 of GSTR 2010/3 it is our view that the character of the supply of XYZ Bullion and other customised bullion products by entity A is not a supply of a precious metal for the purposes of the GST Act. That is, the bullion is traded for something other than its metal value.

Accordingly, the supply of the XYZ Bullion and other customised bullion products by entity A will be a taxable supply under section 9-5 of the GST Act.

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