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Edited version of private ruling
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Ruling
Subject: goods and services tax (GST) and purchase and sale of beer
Question 1
Will you be entitled to an input tax credit in respect of your purchase of the beer from the broker in Australia?
Answer
No.
Question 2
Will GST be payable by you where you sell the beer to the distributor in an overseas country?
Answer
No.
Relevant facts and circumstances
You are registered for GST.
You carry on an enterprise of selling beer.
You will purchase beer from a broker in Australia. The broker in Australia is registered for GST. The broker in Australia carries on an enterprise of selling beer. The broker in Australia will purchase the beer from a manufacturer in an overseas country.
You will sell the beer to a distributor in an overseas country.
The beer will be manufactured in an overseas country and then shipped to a different overseas country.
Reasons for decisions
Question 1
Summary
You will not be entitled to an input tax credit in respect of your purchase of the beer from the broker in Australia, as the sale of the beer to you will not be a taxable supply for GST purposes.
Detailed reasoning
Under section 11-20 of the GST Act, you are entitled to input tax credits for your creditable acquisitions.
Under section 11-5 of the GST Act, you make a creditable acquisition if:
a) you acquire anything solely or partly for a creditable purpose; and
b) the supply of the thing to you is a taxable supply; and
c) you provide, or are liable to provide, consideration for the supply;
and
d) you are registered, or required to be registered.
Taxable supplies
Under section 9-5 of the GST Act, your supply is 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 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.
We shall now consider whether the sale of the beer from the broker in Australia to you will be connected with Australia, as required by paragraph 9-5(c) of the GST Act.
Beer is goods. Subsections 9-25(1) to 9-25(3) of the GST Act specify when a supply of goods will be connected with Australia.
Subsection 9-25(1) of the GST Act states:
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(2) of the GST Act states:
A supply of goods that involves the goods being removed from Australia is
connected with Australia.
Subsection 9-25(3) of the GST Act states:
A supply of goods that involves the goods being brought to Australia is
connected with Australia if the supplier either:
(a) imports the goods into Australia; or
(b) installs or assembles the goods in Australia.
The beer to be sold to you will not be delivered, or made available, in Australia to the recipient of the supply - you.
The supply of the beer to you will not involve goods being removed from Australia.
The supply of the beer to you will not involve goods being brought to Australia.
Hence, the supply of the beer to you will not be connected with Australia. Therefore, the requirement of paragraph 9-5(c) of the GST Act will not be satisfied.
As not all of the requirements of section 9-5 of the GST Act will be satisfied, the sale of the beer from the broker in Australia to you will not be a taxable supply. Therefore, the requirement of paragraph 11-5(b) of the GST Act will not be satisfied.
As you will not satisfy all of the requirements of section 11-5 of the GST Act, you will not make a creditable acquisition of the beer from the broker in Australia, and therefore, you will not be entitled to an input tax credit in respect of your purchase of the beer from the broker in Australia.
Question 2
Summary
GST will not be payable where you sell the beer to the distributor in an overseas country because your sale of the beer will not satisfy the requirements of section 9-5 of the GST Act.
Detailed reasoning
GST is payable by you where you make taxable supplies.
We shall now consider whether your sale of the beer to the distributor in an overseas country will be connected with Australia, as required by paragraph 9-5(c) of the GST Act.
The beer you will sell to the distributor in an overseas country will not be delivered, or made available, in Australia to the recipient of the supply - the distributor in an overseas country.
Your supply of the beer to the distributor in an overseas country will not involve goods being removed from Australia.
Your supply of the beer to the distributor in an overseas country will not involve goods being brought to Australia.
Hence, your sale of the beer to the distributor in an overseas country will not be connected with Australia. Therefore, the requirement of paragraph 9-5(c) of the GST Act will not be satisfied.
As you will not satisfy all of the requirements of section 9-5 of the GST Act, you will not make a taxable supply of the beer to the distributor in an overseas country. Therefore, GST will not be payable by you where you sell the beer to the distributor in an overseas country.