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Edited version of your private ruling
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Ruling
Subject: GST and sale concluded overseas
Question 1
Are you required to charge GST on the sale of machinery overseas?
Answer
No.
Question 2
Is GST included on the invoice raised in Australia for this transaction?
Answer
No.
Relevant facts and circumstances
You are an importer. You purchase machinery from overseas and resell to your customers. When overseas, you purchased machinery and received an order from an Australian customer to buy this machinery. The term of the sale is free on board (FOB); you will fulfill your obligation to deliver when the goods have passed over the ship's rail at the overseas port of shipment. The buyer has to bear all costs and risks of loss of or damage to the machinery from that point. When the machinery arrives at an Australian port, the buyer needs to clear the goods for import including paying the GST levied on the machinery by Customs. The buyer will pay you in Australia. You are registered for GST.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act section 9-5
A New Tax System (Goods and Services Tax) Act section 9-25
Reasons for decision
Summary
The sale of the machinery is not connected with Australia and therefore is not drawn into the GST system.
Detailed reasoning
To be a taxable supply for GST purposes, your sale of machinery should meet the requirements of section 9-5 of the A New Tax System (Goods and Services) Tax Act 1999 (GST Act):
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.
In particular, as per paragraph 9-5(c) above, the sale of the machinery is required to be 'connected with Australia'. A supply of goods to Australia is connected with Australia if it meets the requirements of subsection 9-25(3) of the GST Act:
(3) 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.
Your supply of machinery overseas does not meet the requirements as you (as the supplier) do not import the goods into Australia, nor do you assemble or install the goods in Australia.
As your supply of machinery is not connected with Australia, it does not meet the requirements of section 9-5 of the GST Act. Your supply is not subject to GST.
As your supply is not subject to GST, GST should not be included on the invoice that you raise.