Edited version of private ruling

Authorisation Number: 1011807497640

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Ruling

Subject: GST and entitlement to input tax credits

Question

Can you on behalf of the non-resident company claim back the goods and services tax (GST) which was paid on the product that was delivered to a vessel at an Australian port?

Advice

No, you cannot on behalf of the non-resident company claim back the GST which was paid on the product that was delivered to a vessel at an Australian port.

Relevant facts

You are an Australian owned company and are registered for GST. Your core business is to arrange the purchase and delivery of products to clients at Australian and international ports. Your business is done under the terms of individual contracts enacted for each separate delivery.

You source products from suppliers in Australia and provide instructions so that the products can be delivered to your clients. You facilitate the supply of the products but do not physically hold or store these products. You do not buy the products in bulk to on-sell to other parties. You take financial responsibility for the purchases. You act only under specific instructions from clients.

You recently purchased a product for a vessel. Your customer in the transaction was an overseas company, company A and they were acting under the instructions of the non-resident owner-operator of the vessel for the purchase of the product.

The product order placed by Company A to you is subject to your terms and conditions whereas the product order placed by non-resident owner of the vessel is subject to Company A's terms and conditions.

The owner of the vessel incurred GST on the product purchase in Australia. The owner of the vessel is based overseas, does not have an Australian business number (ABN) and is not registered for GST. They therefore cannot claim the GST paid on the product.

Your arrangement with the owner of the vessel is only as far as what is contained within the agreement you have with Company A.

As you were employed to handle the purchase and delivery of the product, the non-resident owner of the vessel has requested that you lodge a claim on their behalf for the GST credit. You will not receive any consideration from the non-resident owner of the vessel for claiming the GST credits on their behalf. You are merely doing this as they purchased the product through your company and they are unable to make the claim themselves.

You have given us a copy of the following:

· order confirmation for the product from Company A;

· your terms and conditions for the sale of the product to Company A;

· order confirmation for the product to the Australian supplier;

· order confirmation for the product from the Australian supplier and the Australian supplier's terms and conditions for the sale of the product;

· tax invoice you gave to Company A;

· tax invoice and delivery note you have received from the Australian supplier.

Reasons for decision

The term 'agent' is not defined in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and therefore the general law of agency applies.

Goods and Services Tax Ruling GSTR 2000/37 (available at www.ato.gov.au) discuss transactions made by a principal through an agent.

Paragraphs 11, 12 and 61 of GSTR 2000/37 state:

11. For commercial law purposes, an agent is a person who is authorised, either expressly or implied, by a principal to act for that principal so as to create or affect legal relations between the principal and third parties.

12. The principal is bound by the acts of an agent as a result of the authority given to the agent. In cases of actual authority, the relationship between a principal and an agent is a consensual one so that no party can claim to be a principal's agent unless both parties consent to the creation of the agency.

61. Paragraph 29-70(1)(a) requires that the principal (as the supplier) must issue a tax invoice for a taxable supply. However, if a principal makes a taxable supply through an agent, section 153-15 allows either a principal or an agent, but not both, to issue the tax invoice. A principal may be liable to a penalty, under the TAA, if the principal and agent both issue separate tax invoices for the same taxable supply.

Accordingly, if you act as an agent for an entity, actions done on behalf of your principal are, in general law, the actions of the principal. For GST purposes, the principal has all of the GST obligations and entitlements and not the agent.

However, there is a special rule for agents acting for non-residents that is an exception to the general law rule.

Division 57 of the GST Act effectively makes resident agents acting for non-residents responsible for the GST consequences of what the non-residents do through their resident agents and entitles the resident agents to input tax credits for any creditable acquisitions or importations that the non-residents make.

Under subsection 57-10(1) of the GST Act, if a non-resident makes a creditable acquisition or creditable importation through a resident agent:

(a) the agent is entitled to the input tax credit on the acquisition or importation; and

(b) the non-resident is not entitled to the input tax credit on the acquisition or importation.

Paragraphs 45 and 47 of GSTR 2000/37 discuss transactions made by a principal through an agent for the purposes of Division 57 of the GST Act and state.

45. …When an agent is authorised to undertake a transaction on behalf of the principal, thereby binding the principal to the legal effects of the transaction, then the transaction is made by the principal through the agent.

47... When the supply is made through an agent, it is necessary for the agent to make a supply for consideration on behalf the principal and it can only do that if it has the authority of the principal. Also the Explanatory Memorandum of the GST Act explains that the principles of the general law of agency are to be followed in applying GST law to agency relationships.

Based on the facts given, we consider that your role is neither of a nature that meets the context of a resident agent under Division 57 of the GST Act nor the definition of agent in the context of claiming the GST paid on the supply of the product under the general law of agency as:

· The tax invoices you have provided indicate that you are purchasing the product from the Australian supplier in your own right and onselling the product to Company A. Hence you are making a supply to Company A and therefore not acting as their agent when purchasing the product and having it delivered to the vessel.

· The fact that you act under your name when purchasing the product from the Australian supplier and hence bear the commercial risk indicates there is no agency in place. Further there is no evidence that you have authority to sign any binding contract on behalf of Company A or the non-resident owner of the vessel in relation to the acquisition of the product.

· When you ask Company A to confirm the order they have placed with you, this action is to enable you to carry on the sale and to minimise your commercial risk when purchasing the product in your own right from the Australian supplier. The confirmation order allows you to purchase the product from the Australian supplier and to advise the Australian supplier when and where to deliver the product.

· The fact that you ask the Australian supplier to deliver the product to the vessel does not conclude that you are acting as an agent for the non-resident owner of the vessel. By advising the Australian supplier where to deliver the product is allowing the Australian customer to finalise the purchase you have made with them.

· Under your terms of sale, you are making a sale and it is the purchaser who is responsible for obtaining any permits required in respect of the delivery, transport, storage or handling of the product. This clearly indicates that there is no agency in place.

Summary

From the facts given, you are making a supply to Company A and not acting as an agent for Company A and the non-resident owner of the vessel under Division 57 of the GST Act.

You, therefore cannot on behalf of the non-resident owner of the vessel claim back the GST which was paid on the purchase of the product that was delivered to the vessel at an Australian port.