Edited version of your private ruling

Authorisation Number: 1012674860309

Ruling

Subject: GST and precious metals

Question 1

Is GST payable on the importation of the precious metals?

Answer

Yes.

Question 2

If the refined precious metal is reprocessed, is GST payable on the sale?

Answer

Yes, unless it is a GST-free export.

Relevant facts and circumstances

You are an international mining and trading company. You are registered for GST.

You intend to import on a regular basis into Australia from overseas countries small quantities of unrefined precious metals for testing, assaying and refining to bullion standards.

You will contract with an Australian refinery to process the precious metals into bullions to a 99.5% standard and bearing internationally recognised hallmarks.

If the refinery is not interested in purchasing the resultant bullion, you will sell it to a dealer or as outlined in question 2.

In relation to question 2, you may decide to retain the bullion as precious metal holdings and place them with a bank or similar institution for future reprocessing into jewellery for sale to the public.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Section 13-5

A New Tax System (Goods and Services Tax) Act 1999 Section 13-10

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

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

Reasons for decision

Question 1

Summary

GST is payable on the importation of the precious metals.

Detailed reasoning

GST is payable on all taxable importation of goods into Australia.

Section 13-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that an entity makes a taxable importation if:

• goods are imported and

• the entity enters the goods for home consumption within the meaning of the Customs Act 1901.

However, an importation is not a taxable importation to the extent that it is a non-taxable importation.

Section 195-1 of the GST Act provides that 'non-taxable importation' has the meaning given by section 13-10 and Division 42.

Section 13-10 of the GST Act provides that an importation is a non-taxable importation if:

(a) it is a non-taxable importation under Part 3-2 of the GST Act or

(b) it would have been a supply that was GST-free or input taxed if it had been a supply.

Paragraph 13-10(a) of the GST Act

Part 3-2 of the GST Act contains Division 42.

Subsection 42-5(1) provides that an importation of goods is a non-taxable importation if the goods are covered by item 4, 10, 11, 15, 18, 21, 21A, 23, 24, 25, 26 or 27 in Schedule 4 to the Customs Tariff Act 1995. Also, in accordance with subsection 42-5(1C) of the GST Act, an importation of goods is a non-taxable importation if the goods are covered by:

(a) item 1, 3, 7, 12, 13, or 29 in Schedule 4 to the Customs Tariff Act 1995; and

(b) regulations made for the purposes of that subsection

As the Customs Tariff Act 1995 is administered by the Australian Customs and Border Protection Service (ACBPS), we cannot determine if your importation of the precious metals meets the requirements of paragraph 13-10(a) of the GST Act. You can contact ACBPS:

• by telephone on 1300 363 263 from within Australia

• by telephone on 61 2 9313 3010 from outside Australia

• at the ACBPS website at www.customs.gov.au

• or by email at information@customs.gov.au

Accordingly, we will only determine whether the importation of the precious metals meets the requirements of paragraph 13-10(b) of the GST Act to be a non-taxable importation.

Paragraph 13-10(b) of the GST Act

An importation is also a non-taxable importation to the extent that, had it been a supply, the supply would have been a GST-free or input taxed supply.

Section 38-385 of the GST Act provides that 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

(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.

Any subsequent supply of that precious metal is input taxed in accordance with section 40-100 of the GST Act.

The term 'precious metal' is defined in section 195-1 of the GST Act as:

(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 discusses what is a precious metal for the purposes of GST.

Paragraph 10 of GSTR 2003/10 explains that to be a precious metal, a thing must be the metal gold, silver, or platinum of specified fineness, or a substance listed in the regulations. There is no other substance of any particular fineness specified in the A New Tax System (Goods and Services Tax) Regulations 1999. Therefore, only a supply of gold, silver and platinum of the specified fineness which is also in an investment form will be GST-free or input taxed.

Specified fineness

The definition of 'precious metal' requires that gold (in an investment form) be of at least 99.5% fineness.

Investment form

The term 'investment form' is not defined in the GST Act. According to paragraph 14 of GSTR 2003/10 the expression 'investment form' takes its ordinary meaning from the context in which it is used. Colloquially, the expression can be defined as a form in which an item is capable of being held as an investment.

Paragraph 20 of GSTR 2003/10 further explains the expression 'in an investment form' means the metal must be in a physical form that is capable of being traded on the international market for that metal by traders in that metal in that market. The relevant traders are therefore the banks, bullion dealers, commodity brokers and stockbrokers that generally deal in gold, silver or platinum in the bullion market.

Paragraph 29 of GSTR 2003/10 summaries what is in 'investment form'. It states:

To summarise the above, for gold, silver or platinum to be in investment form for the purposes of the GST Act, it must be in a form that:

• is capable of being traded on the international bullion market, that is, it be must be a bar, wafer or coin;

• bears a mark or characteristic accepted as identifying and guaranteeing its fineness and quality; and

• is usually traded at a price that is determined by reference to the spot price of the metal it contains.

Bars, wafers and bullions are the physical forms in which the metals gold, silver and platinum are traded on the international bullion market for these metals.

Furthermore, to be tradeable on the international bullion market, the metal must bear some mark or characteristic on its face accepted by the market as identifying and guaranteeing its fineness and quality, for example a hallmark.

Also, the metal supplied in a tradeable form should be traded at a price that is determined by reference to the spot price of that metal to indicate that it is in an investment form. The spot price reflects the value of the metal content of the metal being traded.

In your case, you are importing precious metals. The precious metal is not in the form of bars, wafers or bullions and does not bear marks or characteristics accepted as identifying and guaranteeing its fineness and quality. Hence, the precious metals not in investment form. As such, the precious metal is not a precious metal for the purposes of the GST Act.

Although it is no longer necessary to consider if the other requirements of section 38-385 of the GST Act are satisfied you should note that this section requires that the metal has been refined by a refiner of precious metal and that the supply is made to a dealer in previous metal.

To be a refiner of precious metal as defined in the GST Act, an entity has to satisfy the Commissioner that the entity regularly converts or refines precious metal in carrying on its enterprise. To be a dealer in precious metal as defined in the GST Act, an entity has to satisfy the Commissioner that a principal part of carrying on the entity's enterprise is the regular supply and acquisition of precious metal.

Consequently, if your importation of the precious metals had instead been supplies, these supplies would not have been GST-free under 38-385 of the GST Act or input taxed under section 40-100 of the GST Act. Additionally, if your importation of the precious metals had instead been supplies, they would not have been GST-free or input taxed under any other provisions of the GST Act or any other Act.

Hence, your importation of the precious metal is not a non-taxable importation under paragraph 13-10(b) of the GST Act but instead it is a taxable importation. Therefore, GST is payable on the importation.

Question 2

Summary

GST is payable on the sale of the jewellery unless it is a GST-free export.

Detailed reasoning

Section 9-40 of the GST Act states that you must pay the GST payable on any taxable supply that you make.

Section 9-5 of the GST Act provides that you make a taxable supply if:

• you make the supply for consideration

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

• the supply is connected with Australia and

• 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.

The sale of the jewellery satisfies the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act as:

• the sale is made for consideration

• the sale is made in the course or furtherance of an enterprise that you carry on

• the sale is connected with Australia and

• you are registered for GST.

The sale of the refined product is a taxable supply unless the requirements of a GST-free or input taxed supply is satisfied.

As outlined above, the first supply of precious metal after refinement may be GST-free under section 38-385 of the GST Act. Any subsequent supply of that precious metal is input taxed under section 40-100.

Items 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 specific items made from gold, silver or platinum. They are therefore not precious metal for the purposes of the GST Act (paragraph 11 of GSTR 2003/10).

There are no provisions of the GST Act that makes the sale of the precious metal items to be input taxed. Furthermore, the sale of these items is not GST-free under section 38-385 of the GST Act.

Therefore, the sale of the product is a taxable supply unless the sale satisfies the requirements of a GST-free export.

Goods and Services Tax Ruling GSTR 2002/6 explains the requirements for supplies of goods to be GST-free exports.

The publications referred to above are available at www.ato.gov.au