ATO Interpretative Decision

ATO ID 2001/677 (Withdrawn)

Goods and Services Tax

• The ATO view on this issue is covered in paragraphs 56-69 of Goods and Services Tax Ruling GSTR 2003/7 and paragraphs 18-25, 31-36, 57-83 and 173-176 of Goods and Services Tax Ruling GSTR 2003/D7.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, a supplier of warranty services, making a GST-free supply under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it provides warranty services, on behalf of a non-resident company, to that company's Australian resident customer?

Decision

No, the entity is not making a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act when it provides warranty services, on behalf of a non-resident company, to that company's Australian resident customer. The entity is making a taxable supply under section 9-5 of the GST Act.

Facts

The entity is a supplier of warranty services. The non-resident company sells equipment directly to a consumer in Australia. The consumer imports the goods into Australia. The non-resident company is neither registered for goods and services tax (GST) nor required to be registered for GST. The non-resident company engages the entity to provide warranty services on the equipment that is in Australia on its behalf.

The entity provides the warranty services on equipment in Australia, on behalf of the non-resident company, to that company's Australian resident customer. The entity invoices the non-resident for the warranty services performed in Australia.

The entity is registered for GST. The supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for Decision

Subsection 38-190(1) of the GST Act specifies the circumstances where the supply of things other than goods or real property, for consumption outside Australia is GST-free. Warranty services are neither goods nor real property. As such, the supply of warranty services is appropriately considered under subsection 38-190(1) of the GST Act.

Item 2 in the table in subsection 38-190 (1) of the GST Act provides that a supply is a GST-free supply where the supply 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 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.

The entity makes supplies of warranty services to a non-resident who is not in Australia when the supply is provided. However, the supply of warranty services on the equipment in Australia is a supply of work physically performed on goods situated in Australia when the work is done. Therefore, the supply of the warranty services is not GST-free under item 2(a) in the table in subsection 38-190(1) of the GST Act.

The non-resident company engages the entity to provide warranty services on the equipment that is in Australia in the course of its enterprise and is neither registered nor required to be registered for GST. Therefore, the supply satisfies the requirements of item 2(b) in the table in subsection 38-190(1) of the GST Act.

However, item 2 in the table in subsection 38-190(1) of the GST Act is limited by the operation of subsection 38-190(3) of the GST Act where it states, without limiting subsection (2), a supply covered by item 2 in that table is not GST-free if:

(a)

it is a supply under an agreement entered into, whether directly or indirectly with a non-resident; and

(b)

the supply is provided, or the agreement requires it to be provided, to another entity in Australia.

The agreement between the entity and the non-resident requires the warranty services to be provided to another entity in Australia. Therefore, subsection 38-190(3) of the GST Act applies and the supply of the warranty services is not GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore the entity is making a taxable supply under section 9-5 of the GST Act when it provides warranty services, on behalf of non-resident company, to that non-resident company's customer in Australia.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   subsection 38-190(1)
   subsection 38-190(1) table item 2
   subsection 38-190(1) table item 2(a)
   subsection 38-190(1) table item 2(b)
   subsection 38-190(3)

Keywords
Goods & services tax
Consumption outside Australia
GST free
Taxable supply

Business Line:  GST

Date of publication:  30 November 2001

ISSN: 1445-2782