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Edited version of private ruling
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Ruling
Subject: GST and supply of goods outside Australia
Question
Are you making a taxable supply when you sell and deliver the goods manufactured outside Australia to your cooperated entity outside Australia?
Advice
No. You are not making a taxable supply when you sell and deliver the goods manufactured outside Australia to your cooperated entity outside Australia. The supply is therefore not subject to GST.
Relevant facts
You are an Australian entity and registered for goods and services tax (GST).
You manufacture goods overseas and supply them to your cooperated entity.
You imported the goods from overseas into Australia for your cooperated entity in the past. You paid the custom duties and GST upon importation.
You have changed this arrangement with your cooperated entity recently and you sell and deliver the goods to your cooperated entity outside Australia instead. The title of the goods would pass to the cooperated entity outside Australian and they might arrange to export the goods themselves.
Reasons for decision
Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you must pay the GST payable on any taxable supply that you make.
Section 9-5 of the GST Act provides that the supply of goods or services that you make is a taxable supply if
a) you make the supply for consideration
b) the supply is made in the course or furtherance of an enterprise that you carry on
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.
Therefore, the supply of goods to your cooperated entity outside Australia will be a taxable supply if it satisfies all the requirements in section 9-5 of the GST Act to the extent that they are not
GST-free or input taxed.
Based on the information provided, you have satisfied the requirements in paragraphs 9-5(a),
9-5(b) and 9-5(d) of the GST Act as follows:
§ you make the supplies for consideration
§ the supplies are made in the course of an enterprise you carry on, and
§ you are registered for GST.
Now we need to determine whether your supply of goods to your cooperated entity outside Australia is connected with Australia under paragraph 9-5(c) of the GST Act.
Connected with Australia
Section 9-25 of the GST Act outlines when a supply is connected with Australia. In determining whether a supply of goods is connected with Australia, a distinction is made between supplies of goods wholly within Australia (subsection 9-25(1) of the GST Act), supplies of goods from Australia (subsection 9-25(2) of the GST Act), and supplies of goods to Australia (subsection 9-25(3) of the GST Act).
Supplies of goods wholly within Australia
Subsection 9-25(1) of the GST Act provides 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.
The phrase 'delivered, or made available' takes the meaning that the goods are either physically delivered, or if not physically delivered, physically made available in Australia. 'Made available' refers to the situation where goods are not actually delivered to the recipient but rather the supplier makes the goods physically available to the recipient in Australia. Both 'delivered' and 'made available' look at the place where the goods are at the relevant time.
Where the recipient imports the goods into Australia, the supply of goods is not connected with Australia under subsection 9-25(1) of the GST Act because the goods are not delivered, or made available, in Australia to the recipient of the supply.
Based on the information provided, you sell the goods to your cooperated entity outside Australia. The goods are delivered and made available to the cooperated entity outside Australia. Therefore, the requirements in subsection 9-25(1) of the GST Act are not satisfied.
Further, subsection 9-25(2) of the GST Act provides that a supply of goods that involves the goods being removed from Australia is connected with Australia. Subsection 9-25(3) of the GST Act provides when a supply of goods that involves the goods being brought to Australia is connected with Australia. Both provisions are not applicable to your case because your goods are not being removed from Australia, nor are the goods brought to Australia by you.
Accordingly, the supply of the goods to your cooperated entity outside Australia is not connected with Australia under paragraph 9-5(c) of the GST Act. As such, it is not a taxable supply and GST is not payable for this supply.