Edited version of private ruling

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Ruling

Subject: goods and services tax (GST) and certificates

Questions

1. Is GST payable on your sales of the certificates to overseas companies?

Answer: No.

2. Are you entitled to input tax credits on your purchase of the certificates where you on-sell them to overseas companies?

Answer: Yes.

Relevant facts and circumstances

You are registered for GST.

You are an Australian company that is only based in Australia.

You purchase certificates.

The sales of the certificates to you are made by GST registered entities, and through enterprises that the suppliers carry on in Australia.

The supplies of the certificates to you are made under agreements entered into between your suppliers and you. Your suppliers provide the certificates to you and the agreements you have with your suppliers require your suppliers to provide the certificates to you.

You on-sell the certificates to overseas companies under agreements you enter into with them, and you make these supplies through an enterprise that you carry on in Australia.

The overseas companies, which you sell the certificates to, are non-residents.

The overseas companies, which you sell the certificates to, carry on businesses, but not in Australia.

Where you enter into an agreement with an overseas company to supply certificates to the overseas company, the certificates are not provided, and the agreement does not require the certificates to be provided, to another entity in Australia.

Reasons for decisions

Question 1

Summary

GST is not payable on your sales of the certificates to overseas companies, as they are GST-free supplies 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).

Detailed reasoning

GST is payable by you where you make taxable supplies.

You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which 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 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.

(*Denotes a term defined in section 195-1 of the GST Act)

In your case, you satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, you supply the certificates to overseas companies for consideration and in the course or furtherance of an enterprise that you carry on. Additionally, your supplies of the certificates are connected with Australia and you are registered for GST.

There are no provisions in the GST Act under which your supplies of the certificates are input taxed.

Therefore, what remains to be determined is whether your supplies of the certificates are GST-free.

Item 2 in the table in subsection 38-190(1) of the GST Act provides that a supply other than goods or real property is GST-free 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 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.

Subsection 38-190(3) of the GST Act states:

Without limiting subsection (2) or (2A), 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.

Your supplies of the certificates are supplies other than goods or real property.

The overseas companies, which you sell the certificates to are non-residents.

Paragraph 31 of GSTR 2004/7 states:

31. The requirement that the non-resident in item 2, or the recipient in item 3, is not in Australia when the thing supplied is done is a requirement, in our view, that the non-resident or recipient is not in Australia in relation to the supply when the thing supplied is done.

Paragraph 37 of GSTR 2004/7 states:

37. A non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia:

(a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

(b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

The overseas companies, which you sell the certificates to, are non-resident companies that carry on businesses, but they do not carry on businesses in Australia. Therefore, they are not in Australia when the things supplied are done.

Your supplies of the certificates to overseas companies are not supplies of work physically performed on goods situated in Australia when the work is done or supplies directly connected with real property situated in Australia. Hence, the requirements of paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act are satisfied.

Therefore, you satisfy all of the requirements of item 2 in the table in subsection 38-190(1) of the GST Act.

You supply the certificates to overseas companies under agreements you enter into with non-residents. Therefore, you satisfy the requirement of paragraph 38-190(3)(a) of the GST Act.

However, your supplies of the certificates to overseas companies are not provided, and the agreements you enter into with the overseas companies do not require your supplies of the certificates to be provided, to other entities in Australia. Therefore, the requirement of paragraph 38-190(3)(b) is not satisfied.

As not all of the requirements of subsection 38-190(3) of the GST Act are satisfied, subsection 38-190(3) of the GST Act does not apply to you.

Hence, your supplies of the certificates to overseas companies are GST-free supplies under item 2 in the table in subsection 38-190(1) of the GST Act.

As not all of the requirements of section 9-5 of the GST Act are satisfied, you do not make taxable supplies of the certificates to overseas companies. Therefore, GST is not payable on your sales of the certificates to overseas companies.

Question 2

Summary

You are entitled to input tax credits on your purchase of the certificates as all of the requirements of section 11-5 of the GST Act are satisfied.

Detailed reasoning

You are entitled to input tax credits on your creditable acquisitions.

You make a creditable acquisition where you satisfy the requirements of section 11-5 of the GST Act, which states:

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.

Creditable purpose

Subsection 11-15(1) of the GST Act states:

You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your *enterprise.

Subsection 11-15(2) of the GST Act states:

However, you not acquire the thing for a creditable purpose to the extent that:

(a) the acquisition relates to making supplies that would be *input taxed;

or

(b) the acquisition is of a private or domestic nature.

You acquire the certificates in carrying on your enterprise.

Your acquisitions of the certificates do not relate to making supplies that would be input taxed and these acquisitions are not of a private or domestic nature.

Hence, you acquire the certificates for a creditable purpose, and therefore, the requirement of paragraph 11-5(a) of the GST Act is satisfied.

Taxable supply

The sales of the certificates to you satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act. That is, these supplies are made for consideration and in the course or furtherance of enterprises that the suppliers carry on. Additionally, these supplies are connected with Australia and the suppliers are registered for GST.

There are no provisions in the GST Act under which these supplies are GST-free or input taxed.

Hence, as all of the requirements of section 9-5 of the GST Act are satisfied, taxable supplies are made to you of the certificates. Therefore, the requirement of paragraph 11-5(b) of the GST Act is satisfied.

Consideration

You provide consideration for the supplies of the certificates made to you. Therefore, the requirement of paragraph 11-5(c) of the GST Act is satisfied.

Registration

You are registered for GST. Therefore, the requirement of paragraph 11-5(d) of the GST Act is satisfied.

Conclusion

As you satisfy all of the requirements of section 11-5 of the GST Act, you make creditable acquisitions of the certificates, and therefore, you are entitled to input tax credits on your purchase of the certificates (this will be the case whether you on-sell them to Australian entities or overseas companies).