Edited version of your written advice

Authorisation Number: 1012768987571

Ruling

Subject: GST and sale of good located outside Australia

Question 1

Will the sale of the good which you have manufactured be considered an export for goods and services tax (GST) purposes and as such GST-free if taken out from Australia and sold whilst physically located overseas, or will this not have the necessary connection with Australia and be outside the GST legislation, in effect being not reportable and not subject to GST on sale?

Answer 1

Based on the information received, the sale of the good which you have manufactured will not be considered to be an export of goods under section 38-185 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) since the good will already be outside Australia at the time of the supply and therefore section 38-185 of the GST Act will not be applicable.

Further, the sale of the good will not be a taxable supply under section 9-5 of the GST Act because all the requirements in section 9-5 of the GST Act will not be met since the supply of the good will not be connected with Australia under section 9-25 of the GST Act at the time of the supply. GST will therefore not be applicable to the supply of the good located overseas.

Question 2

Will you be entitled to claim input tax credit for the acquisitions made to construct the good which may be sold when located overseas?

Answer

Yes, you will be entitled to claim input tax credit for the acquisitions made to construct the good which may be sold when located overseas where all the requirements in section11-5 of the GST Act are satisfied.

Relevant fact

You are registered for GST. You have designed, trademarked and manufactured a good for the purposes of sale and repeat orders.

You have recently launched the good in Australia and intend on taking it overseas for a show. You may sell the good while it is located outside Australia.

Your intention is to use the good to generate orders to be manufactured in Australia and exported.

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 9-25

A New Tax System (Goods and Services Tax) Act 1999 Section 11-20

A New Tax System (Goods and Services Tax) Act 1999 Section 11-5

A New Tax System (Goods and Services Tax) Act 1999 Section 38-185

Reasons for decisions

Question 1

Will the sale of the good located outside Australia be an export for GST purposes?

Section 38-185 of the GST Act provides when a supply of goods is GST-free when the goods are exported from Australia.

You advised that the good is located outside Australia when you will sell it. In this instance there is no export made at the time you will sell the good. Section 38-185 of the GST Act will not be applicable to this sale.

For more information on export of goods please refer to Goods and Services Tax Ruling GSTR 2002/6 which is available from the legal database of www.ato.gov.au

Will the supply of the good be connected with Australia?

GST is payable on a taxable supply. You make a taxable supply under section 9-5 of the GST Act 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.

All of the above requirements must be satisfied for a supply to be a taxable supply under section 9-5 of the GST Act.

One of the requirements for a supply to be a taxable supply is the supply is connected with Australia.

Goods and Services Tax Ruling GSTR 2000/31 provides guidance on when a supply is connected with Australia and is available from the legal database of www.ato.gov.au

A supply of goods is connected with Australia if:

• the goods are delivered, or made available in Australia to the recipient of the supply (subsection 9-25(1) of the GST Act);

• the supply of goods involves the goods being removed from Australia (subsection 9-25(2) of the GST Act);

• the supply of goods involves the goods being brought to Australia and the supplier either imports the goods into Australia or installs or assembles the goods in Australia (subsection 9-25(3) of the GST Act).

You advised that the good will be located outside Australia when you will sell it. In this instance the supply of the good will not be connected with Australia since none of the above will be satisfied. You will not satisfy the requirement of paragraph 9-5 (c) of the GST Act at the time of the supply.

Accordingly, your supply of the good will not be a taxable supply under section 9-5 of the GST Act and GST will not be applicable to the supply.

Question 2

Under section 11-20 of the GST Act an entity is entitled to input tax credit for any creditable acquisition that they make.

Under section 11-5 of the GST Act an entity makes a creditable acquisition if:

a) the entity acquires anything solely or partly for a creditable purpose; and

b) the supply of the thing to the entity is a taxable supply; and

c) the entity provides, or is liable to provide, consideration for the supply; and

d) the entity is registered or required to be registered for GST.

Under subsection 11-15(1) of the GST Act, an entity acquires a thing for a creditable purpose to the extent that they acquire it in carrying on their enterprise.

However, under subsection 11-15(2) of the GST Act the entity does not acquire the thing for a creditable purpose to the extent that:

a) the acquisition relates to making supplies that would be input taxed; or

b) the acquisition is of a private or domestic nature.

Based on the information given subsection 11-15(2) of the GST Act is not applicable to you in regard to the purchases you made to construct the good. The things you acquire to construct the good are for a creditable purpose under subsection 11-15(1) of the GST Act because you are acquiring the things for your business purposes.

Accordingly, your acquisitions to construct the good will be creditable acquisitions under section 11-5 of the GST Act where the supply of the things to you is a taxable supply. This means where all the requirements in section 11-5 of the GST Act are satisfied you are entitled to claim input tax credits for acquisitions related to the construction of the good.