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Edited version of your private ruling
Authorisation Number: 1012588741133
Ruling
Subject: GST and supply of sales and marketing services
Question
Based on the information you provided, are the supplies of sales and marketing services you made to the non-resident entities GST-free?
Advice
Yes, based on the information you provided, the supplies of sales and marketing services you made to the non-resident entities are GST-free 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).
Relevant facts
You are a company located in Australia and are registered for the goods and services tax (GST).
You currently have contracts with non-resident entities based offshore in which you agreed to provide sales and marketing services to them within the sales territory of Australia (copy of contracts received). You act on their behalf to market their hotels, apartments and resorts to the travel industry in Australia for Australians travelling on vacation internationally.
You receive a retainer fee payment for the supply of your services to the offshore clients. All accommodations are offshore as none of the clients have interests or properties within Australia.
You market the hotels, apartments and resorts of the offshore clients to wholesale travel companies and retail travel agencies located in Australia. You do not have any contract with these Australian travel companies and retail travel agencies. You do not take any bookings for these hotels, apartments and resorts.
None of the offshore clients carry on any business in Australia. They neither have any subsidiary or representatives in Australia. They are not registered or required to be registered for GST.
The training for sales and/or reservation staff is done overseas and the training is for the staff of the resort.
Relevant legislative provisions
A New Tax system (Goods and Services Tax) Act 1999 (GST Act) section 9-5
A New Tax system (Goods and Services Tax) Act 1999 (GST Act) section 38-190
Reasons for decision
GST is payable on a taxable supply. To be a taxable supply, the supply must meet the conditions under section 9-5 of the GST Act. This section provides that 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 for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
From the information received, you satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act when you supply your sales and marketing services to the non-resident entities specified in the contracts you gave to us as:
a) you make the supply for consideration; and
b) the supply is made in the course of an enterprise (business) that you carry on; and
c) the supply of your sales and marketing services is connected with Australia as you are making the supply through a business that you carry on in Australia; and
d) you are registered for GST.
However, the supply of the sales and marketing services is not a taxable supply to the extent that it is GST-free or input taxed.
Your supply of sales and marketing services is not input taxed under any provision in the GST Act. The next step is to consider whether the supply of sales and marketing services is GST-free as they were made to non-residents of Australia.
GST-free
Under section 38-190 of the GST Act certain supplies other than supplies of goods or real property for consumption outside Australia are GST-free.
Of particular relevance to the supply of sales and marketing services is item 2 in the table in subsection 38-190(1) of the GST Act (Item 2).
Item 2 appears as follows:
Supplies of things, other than goods or real property, for consumption outside Australia | ||
Item |
Topic |
These supplies are GST-free (except to the extent that they are supplies of goods or *real property)... |
2 |
Supply to *non-resident outside Australia. |
a supply that 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. |
(* denotes a defined term under section 195-1 of the GST Act)
For a supply to be within the scope of Item 2, the supply must be made to a non-resident who is not in Australia when the thing supplied is done. The expression 'not in Australia' requires that the non-resident is not in Australia in relation to the supply.
From the facts given, your customers in the contracts are non-residents .They were not in Australia at the time of your supply and do not carry on any business activity in Australia. In this instance, your supply of sales and marketing services satisfies the GST-free requirements in paragraph (a) of Item 2 as:
· the non-residents were not in Australia in relation to the supply when the supply of sales and marketing services was made; and
· the supply of sales and marketing services is neither a supply of work physically performed on goods situated in Australia nor a supply directly connected with real property situated in Australia.
Further, your supply of sales and marketing services satisfies paragraph (b) of Item 2 as the non-resident clients acquire your sales and marketing services for their business purposes and you have advised that they are not registered or required to be registered for GST.
Your supply of sales and marketing services is GST-free under Item 2 to the extent that they are not negated by the limitations discussed below.
Limitations
Subsection 38-190(2) of the GST Act
Subsection 38-190(2) of the GST Act provides that a supply covered by any of the items 1 to 5 in the table in subsection 38-190(1) of the GST Act is not GST-free if it is the supply of a right or option to acquire something the supply of which would be connected with Australia and would not be GST-free.
From the facts given, subsection 38-190(2) of the GST Act is not applicable as the supply of the sales and marketing services is not a supply of a right or option to acquire something the supply of which would be connected with Australia and would not be GST-free.
Subsection 38-190(2A) of the GST Act
Subsection 38-190(2A) of the GST Act provides that a supply covered by any of items 2 to 4 in the table in subsection 38-190(1) of the GST Act is not GST-free if the acquisition of the supply relates (whether directly or indirectly, or wholly or partly) to the making of a supply of real property situated in Australia that would be input taxed under Subdivision 40-B or 40-C.
From the facts given, subsection 38-190(2A) of the GST Act is not applicable as the supply of sales and marketing services does not relate to the making of a supply of real property situated in Australia.
Subsection 38-190(3) of the GST Act
Subsection 38-190(3) of the GST Act provides that a supply covered by Item 2 is not GST-free if:
· it is a supply under an agreement entered into, whether directly or indirectly with a non-resident; and
· the supply is provided or the agreement requires it to be provided, to another entity in Australia.
Based on the information received, the product training that is provided to the sales and/or reservation staff is done overseas. Subsection 38-190(3) of the GST Act is not applicable as you are not required to provide your sales and marketing services to another entity in Australia.
For more information on Item 2 and subsection 38-190(3) of the GST Act refer to Goods and Services Tax Rulings GSTR 2004/7 and 2005/6 (available at www.ato.gov.au).
Summary
The supply of sales and marketing services which you have made to the non-resident customers, as specified in the contracts you gave to us is GST-free under item 2 in the table in subsection 38-190(1) of the GST Act.