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Edited version of your written advice
Authorisation Number: 1051357725497
Date of advice: 6 April 2018
Ruling
Subject: GST and a supply of goods to a non-resident entity
Question 1
Is the supply of goods by an Australian entity (you) to a non-resident entity subject to GST where the goods are sourced from overseas and directly shipped outside Australia?
Answer
No, your supply of the goods to a non-resident entity is not connected with Australia and therefore not subject to GST.
Question 2
Is the supply of the goods by you to a non-resident entity GST-free, where you will export the goods from Australia to overseas?
Answer
The supply of the goods by you to the non-resident entity will be GST-free if it satisfies requirements of section 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
Relevant facts and circumstances
You are an Australian entity which is registered for GST.
You supply goods to a non-resident entity in Country X. You buy the goods and then resell the goods to a non-resident entity outside Australia.
You receive purchase orders from the non-resident entity from overseas for the supply of the goods. Then you as a supplier buy the goods from outside Australia and ship the goods to another overseas country. The goods do not pass through Australia.
In future, you are planning to buy some goods in Australia and resell the goods to non-resident entities outside Australia for export.
You will be the entity responsible for shipping and transport of the goods from Australia to various overseas destinations.
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
A New Tax System (Goods and Services Tax) Act 1999 Section 38-185
A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-185(1)
A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-185(3)
Reasons for decisions
Issue 1
Taxable supply
GST is payable on a taxable supply. Section 9-5 of the 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 (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.
Based on the facts provided, you satisfy the requirements under paragraphs 9-5(a), 9-5(b) & 9-5(d) of the GST Act as follows:
(a) you make the supply of the goods for consideration;
(b) the supply of the goods the course of carrying on your enterprise; and
(d) you are registered for GST.
What remains to be determined is whether the supply is connected with Australia for the purposes of paragraph 9-5(c) of the GST Act.
Supplies connected with Australia
Section 9-25 of the GST Act sets out the circumstances under which a supply is connected with Australia.
A supply of goods is connected with Australia if:
● the goods are delivered or made available in Australia to the recipient of the supply (subsection 9-25(1) of the GST Act); or
● the supply of the goods involves the goods being removed from Australia (subsection 9-25(2) of the GST Act); or
● the supply of the goods involves the goods being brought to Australia and the supplier imports the goods into Australia (subsection 9-25(3) of the GST Act). or
● from 1 July 2018, supplies of low value imported goods to a consumer in Australia
Goods and Services Tax Ruling GSTR 2000/31 explains when a supply is connected with Australia under section 9-25 of the GST Act and Goods and Services Tax Ruling GSTR 2003/15 provides an explanation on the importation of goods into Australia.
Subsection 9-25(1) of the GST Act states that a supply of goods is connected with Australia if the goods are 'delivered, or made available', in Australia to the recipient of the supply.
Based on the information provided, you purchase the goods from overseas and resell the goods to a non-resident entity outside Australia. The goods are delivered and made available outside Australia. Your supply of the goods to a non-resident entity is not connected with Australia under section 9-25 of the GST Act as the goods are not delivered, made available or brought to Australia. As such your supply of the goods does not satisfy the requirements of paragraph 9-5(c) of the GST Act and therefore is not a taxable supply.
Accordingly your supply of goods to the non-resident entity does not satisfy all the requirements of section 9-5 of the GST Act and is not a taxable supply. Hence, you are not liable to pay GST on this supply.
Issue 2
GST-free export
Section 38-185 the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) covers the GST-free export of goods.
Item 1 in the table in subsection 38-185(1) of GST Act (Item 1) states that a supply of goods is GST-free where the supplier exports them from Australia before, or within 60 days (or such further period as the Commissioner allows) after:
(a) the day on which the supplier receives any of the consideration for the supply; or
(b) if, on an earlier day, the supplier gives an invoice for the supply - the day on which the supplier gives the invoice.
Item 2 provides that a supply of goods for which consideration is provided in instalments under a contract that requires the goods to be exported is GST-free, but only if the supplier exports the goods from Australia before, or within 60 days (or such further period as the Commissioner allows) after:
(a) the day on which the supplier receives any of the final instalment of the consideration (payment) for the supply; or
(b) if, on an earlier day, the supplier gives an invoice for that final instalment – the day on which the supplier gives the invoice.
The GST law requires the goods to be actually exported by the supplier before or within 60 days after the day on which the supplier receives any of the consideration for the supply, or the supplier gives an invoice for the supply.
One of other condition under Section 38-185 of the GST Act is, the goods are not altered or used in any way before the supplier exports the goods from Australia.
The Australian Taxation Office (ATO) has released a Goods and Services Tax Ruling GSTR 2002/6. Goods and services tax ruling GSTR 2002/6: Exports of goods, items 1 to 4A of the table in subsection 38-185(1) of the A New Tax System (Goods and Services Tax) Act 1999 which provides guidance on export of goods.
Link: http://law.ato.gov.au/atolaw/view.htm?docid=GST/GSTR20026/NAT/ATO/00001
For a supply of the goods to be GST-free under Item 2, the supplier must export the goods before, or within a 60 day period.
Supplier is the entity that exports
The requirement that the supplier is the entity that exports the goods is satisfied where:
● the supplier contracts at their own expense with an international carrier for the transportation of the goods to a destination outside Australia; or
● the supplier is responsible for delivering the goods to the operator of a ship or aircraft that has been engaged by another party to transport those goods to a destination outside Australia; or
● the requirements of subsection 38-185(3) of the GST Act are satisfied.
In summary, the supply of goods by you will be GST-free if all the requirements of section 38-185 of the GST Act) are satisfied.
The following Australian Taxation Office (ATO) publication and public ruling address this issue:
Fact sheet - Exporting goods or services overseas - what you need to know:
The following publications which will be of assistance to your question:
– Goods and Services Tax Ruling GSTR 2002/6: Export of goods, items 1 to 4 of the table in subsection 38-185(1) of the GST Act. This ruling explains when supplies of goods are GST-free exports.
– All the above publications are available on the Australian Taxation Office website at www.ato.gov.au
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