Edited version of private advice

Authorisation Number: 1012655490327

Ruling

Subject: GST and Gold Bullion

Question

Is the supply of your gold bullion bars stamped with your company's logo hallmark, subject to Goods and Services Tax (GST)?

Decision

No, the supply of your gold bullion bars is not subject to GST. It is input taxed.

Relevant facts and circumstances

You advised us of the following facts:

• you sell scrap gold in the form of second hand jewellery to a registered gold refiner;

• thereafter you buy back from the refiner your gold refined and converted to gold bullion bars;

• currently you deal with only gold bullion. In future, you plan to deal with silver bullion too;

• the refined gold bullion bars are stamped with your company logo hallmark. They are 99.99% pure;

• your gold bullion bars are recognised and traded in the Australian bullion market as precious metal at the spot price;

• you have been advised that your bullion bars stamped with your company hallmarks would be subject to GST.

Relevant legislative provisions

A New Tax System (Goods and Services ) Act 1999 section 38-385

A New Tax System (Goods and Services ) Act 1999 section 40-100

Reasons for the decision

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable supply where the following requirements are met:

• you make a supply for consideration;

• the supply is made in the course or furtherance if an enterprise that you carry on;

• the supply is connected with Australia; and

• you are registered or required to be registered for GST.

However you do not make a taxable supply to the extent a supply is GST-free or input taxed.

Therefore, it is necessary to determine whether your supply of gold bullion bars is either GST-free or input taxed.

There are two provisions in the GST Act that are relevant to the supply of precious metals. These are section 38-385 and 40-100 of the GST Act which respectively state:

38-385 Supplies of precious metals

A supply of *precious metal is GST-free if:

(a) it is the first supply of that precious metal after its refining by, or on behalf of, the supplier; and

(b) the entity that refined the precious metal is a *refiner of precious metal; and

(c) the *recipient of the supply is a *dealer in precious metal.

40-100 Precious metals

A supply of *precious metal is input taxed.

(an * refers to a term which is defined in section 195-1 of the GST Act)

Section 195-1 of the GST Act defines the term 'precious metal' as follows:

precious metal means:

(a) gold (in an investment form) of at least 99.5% fineness; or

(b) silver (in an investment form) of at least 99.9% fineness; or

(c) platinum (in an investment form) of at least 99% fineness; or

(d) any other substance (in an investment form) specified in the regulations of a particular fineness specified in the regulations.

Goods and Services Tax Ruling GSTR 2003/10 considers what is 'precious metal' for the purposes of the GST Act and discusses when gold, silver or platinum are in 'an investment form' for the purpose of the definition of precious metal.

In respect of a metal which is gold, silver or platinum, paragraph 11 and 12 of GSTR 2003/10 state:

11. To be the metal gold, silver or platinum, the item must have the character of the metal rather than the character of a thing made from the metal. Items such as jewellery that happen to be made of gold, silver or platinum are not gold, silver or platinum for the purposes of the definition of precious metal in the GST Act. They no longer have the character of the metal gold, silver or platinum. They have the character of jewellery made from gold, silver or platinum. They are therefore not precious metal for the purposes of the GST Act.

12. A factor that can point to whether something has lost its character as the metal gold, silver or platinum is whether it is traded at a price that is determined by reference to the prevailing spot price for the metal. If something is not usually traded at a price determined by reference to the prevailing spot price of its metal content it is not being traded for its metal value only. This suggests that it does not have the character of the relevant metal. It has another character. An example is proof coins. As noted at paragraph 38, proof coins are traded at a price that reflects the quality of the finish over and above what is necessary to trade the metal value. The price is not determined solely by the metal value of the coin. The price is determined by reference to the spot price and by reference to the quality of the physical characteristics of the coin. The latter indicates that proof coins are not traded for the metal value only and therefore indicates that they do not have the character of the metal, but rather the character of manufactured articles, that is, coins made from the metal. This means that proof coins are not precious metal.

Paragraphs 22 and 34 to 36 inclusive of GSTR 2003/10 are relevant in reference to the hallmark on your bullion bars.

22. Bars, wafers and bullion coins are the physical forms in which the metals gold, silver and platinum are traded on the international bullion market for those metals. These are therefore forms of those metals that are capable of being traded on the international bullion market.

34. Bars and wafers that are hallmarked with hallmarks listed in the ICGB bear an accepted mark as to their fineness and quality. The list of hallmarks in the ICGB is not exhaustive. There are other hallmarks, such as the ABC hallmark, that are accepted as guaranteeing fineness and quality.

35. Such bars and wafers are produced at varying weights. If they are in a form traded at prices determined by reference to the spot price, such bars and wafers are in an investment form. If so, and they are of gold, silver or platinum of the requisite fineness, they are precious metal for the purposes of the GST Act.

36. As an example, some small refiners in Australia make bars that are only traded in Australia. As noted at paragraph 22, bars are an internationally traded form of metal. If the bars produced by the refiner have a hallmark that is accepted in their market as guaranteeing the fineness and quality of the metal they will be in a tradeable form bearing an accepted mark or characteristic. If such bars are traded at a price determined by reference to the spot price they will be in an investment form.

Your bullion bars are gold which is 99.99% pure, have your own hallmark which is recognised in the Australian bullion market and are traded for the spot price of metal in the market. Therefore, they fall within the meaning of precious metal. While you are not a refiner of precious metal, the entity that refines the precious metal does the work on your behalf producing the gold in bars, which you trade on the market as the pure metal.

You have advised us that you sell scrap gold like jewelry to your gold refiner and buy refined gold bullion bars stamped with your hallmark and 99.99% purity from your gold refiner. Consequently, your supplies of gold bullion bars are not the first supply of refined gold.

In this respect paragraph 7 of GSTR 2003/10 states:

7. The first supply of precious metal after its refining may be GST-free under section 38-385. Apart from transactions that fall within the ambit of section 38-385 (or section 38-185, which is about exported goods), supplies of precious metal are input taxed under section 40-100.

As your supply of gold bullion bars satisfy sections 40-100 of the GST Act, your supply of gold bullion bars is input taxed.