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Edited version of your written advice
Authorisation Number: 1012792211320
Ruling
Subject: GST and acquisition of inspection and certification services
Question
Was the supply of inspection and certification services made by the Australian company to the non-resident company a taxable supply for the purposes of paragraph 11-5(c) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Advice
No, the supply of inspection and certification services made by the Australian company to the non-resident company was not a taxable supply for the purposes of paragraph 11-5(c) of the GST Act. The supply was GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.
Relevant fact
You are a registered company trading outside Australia and are not registered for the goods and services tax (GST). You do not carry any business activity through an agent or a subsidiary company in Australia.
You purchased goods from an Australian company and these goods were exported from Australia.
Before the goods could be exported from Australia you were required to have a pre-inspection certification of the goods since this is mandatory for shipments from Australia to the overseas country.
You acquired the services of an Australian company (supplier) for the pre-inspection certificate. When the supplier carried on their supply you did not have any representative in Australia. Your contacts with the supplier were only via phone and email.
There was a third party involved when the supplier carried on their supply. The third party was the Australian cargo supplier and they were involved when the supplier sent its inspector for physical on-site inspections. Loading site details were provided to the inspector and the cargo supplier would let the supplier witness the loading procedure and take photos.
The supplier has charged you GST for their inspection and certification services.
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 38-190.
Reasons for decisions
Taxable supply
GST is payable on a taxable supply. You make a taxable supply under section 9-5 of the GST Act 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 for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
All of the above requirements must be satisfied for a supply to be a taxable supply under section 9-5 of the GST Act.
From the information received, the supplier satisfied paragraphs 9-5(a) to 9-5(d) of the GST Act when it supplied its inspection and certification services to you as:
a) the supplier made the supply for consideration; and
b) the supply was made in the course of the business that the supplier carries on; and
c) the supply was connected with Australia as the services were done in Australia; and
d) the supplier is registered for GST.
However, with respect to either input taxed or GST-free status:
Input taxed
There is no provision under the GST Act that makes the supply of inspection and certification services input taxed.
GST-free
Relevant to the supply of inspection and certification services is item 2 in the table in subsection 38-190(1) of the GST Act (item 2).
Item 2 provides that a supply of a thing (other than goods or real property) made to a non-resident 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:
(a) 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
(b) the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered for GST.
Paragraph (a) of item 2
From the information provided, when the supplier supplied inspection and certification services to you the requirements in paragraph (a) of item 2 were satisfied as:
• the supply of inspection and certification services was made to a non-resident who was not in Australia when the thing supplied was done; and
• in regard to the inspection and certification services, the issue of the certificate to you was the result of the inspection of the goods. In this instance when the supplier issued the certificate it was supplying information; the inspection of the goods enabled the information to be compiled and was ancillary to the information being given in the certificate. Accordingly, the inspection and certification services were neither a supply of work physically performed on goods situated in Australia when the work was done, nor a supply directly connected with real property situated in Australia.
As the requirements of paragraph (a) of item 2 are satisfied, there is no need to consider if the requirement of paragraph (b) of item 2 is met. However, item 2 is limited by subsection 38-190(3) of the GST Act.
Limitations of item 2 - subsection 38-190(3) of the GST Act
If the supply covered by item 2 is under an agreement entered into, whether directly or indirectly, with a non-resident entity and that supply is provided or the agreement requires that it be so provided to another entity in Australia, subsection 38-190(3) of the GST Act negates the GST-free status of that supply.
From the information received subsection 38-190(3) of the GST Act was not applicable as the supplier was not required to provide the inspection and certification services to another entity in Australia.
Summary
The supplier's supply of inspection and certification to you was therefore GST-free under paragraph (a) of item 2. GST is not applicable to the supply.
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