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Edited version of your written advice
Authorisation Number: 1013056044744
Date of advice: 19 July 2016
Ruling
Subject: GST and supply of services
Question
Is your supply of services a taxable supply?
Answer
No. Your supply of services is not a taxable supply. The supply is GST-free under item 1 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999.
Relevant facts and circumstances
You are a company incorporated in Australia. You are registered for GST.
You entered into a contract with another entity to provide your services in producing goods for use at a visitor centre to be built overseas. Your services would also include testing and commissioning of the goods at the centre.
The centre will provide an informative, educational and enriching experience to visitors using the goods that you will produce. The goods that you will produce under the contract are entirely for display at the centre.
The contract does not require you to provide the services to another entity outside the indirect tax zone.
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 subsection 38-190(1)
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:
(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 the indirect tax zone; 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 term defined under section 195-1 of the GST Act)
Your supply of services is made for consideration and in the course of carrying on your enterprise. The supply is connected with the indirect tax zone as the supply is made through an enterprise that you carry on in the indirect tax zone. You are registered for GST. The requirements in paragraphs 9-5(a) to 9-5(d) of the GST Act are satisfied; therefore, your supply of services is a taxable supply unless it is GST-free or input taxed.
Under subsection 38-190(1) of the GST Act certain supplies of things, other than goods or real property, for consumption outside the indirect tax zone are GST-free.
Item 1 in the table in subsection 38-190(1) of the GST Act (item 1) provides that a supply that is directly connected with goods or real property situated outside the indirect tax zone is GST-free.
Goods and Services Tax Ruling GSTR 2003/7 examines the meaning of the expressions 'directly connected with goods or real property' as used in subsection 38-190(1) of the GST Act.
Paragraphs 131 and 132 of GSTR 2003/7 provide our view that the expression 'directly connected with' contemplates a very close link or association between the supply and the goods or the real property. The connection is only sufficiently close to be characterised as a direct one where the supply has a connection with particular goods or real property.
In paragraph 134 of GSTR 2003/7, we consider that a supply of a thing other than goods or real property is directly connected with goods or real property where, for example, the direct object of the supply is the goods or real property in the sense that:
• the supply changes or affects the goods or real property in a physical way;
• there is physical interaction with the goods or real property but without changing the goods or real property;
• the supply establishes the quantity, size, other physical attributes or the value of the goods or real property;
• the supply affects (or its purpose is to affect) or protects the nature or value (including indemnity against loss) of the goods or real property; or
• the supply affects, or is proposed to affect, the ownership of the goods or real property including any interest in, or right in or over goods or real property.
The centre will be built overseas to provide an informative, educational and enriching experience to visitors using the goods that you will produce. Therefore, the centre will have less value without the goods that you will produce under the contract. Furthermore, the goods that you will produce will be used entirely at the centre; thus, we consider that the supply of your services is directly related to a real property located outside the indirect tax zone.
As your supply of services is covered by Item 1, the supply is GST-free.
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