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Edited version of your written advice
Authorisation Number: 1012917081860
Date of advice: 24 November 2015
Ruling
Subject: GST and online sales
Question
How are the supplies of on-line services from X Pty Ltd to be treated for GST?
Relevant facts and circumstances
X Pty Ltd provides online services for entities that are interested in the information/data they provide. The entities are mainly non-residents outside of Australia and some can also be residents in Australia.
The server is situated outside of Australia; however, the supplies are made through X Pty Ltd, an Australian entity.
The online service is provided on a subscription bases.
Relevant legislative provisions
Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999
Subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999
Reasons for decision
You make a taxable supply if you satisfy section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
This section provides that you make a taxable supply if:
• You make a supply for consideration, and
• The supply is made in the course or furtherance of an enterprise that you carry on, and
• The supply is connected with *Australia, and
• You are registered or required to be registered.
However, the supply is only taxable to the extent it is not GST-free or input taxed.
* Australia refers to the term indirect tax zone as defined in section 195-1 of the GST Act.
In your circumstances, your supplies of online services will satisfy section 9-5 of the GST Act. As you make supplies for consideration, the supplies are made in the course of an enterprise you carry on, the supply is connected with Australia as it is made through your enterprise in Australia, and you are registered for GST.
Therefore, your supplies will be taxable where you provide your online service to residents in Australia.
However, as mentioned the supply is only taxable to the extent it is not GST-free or input taxed.
There are no provisions that would result in the supply being input taxed but consideration needs to be given to the GST-free provision under section 38-190 of the GST Act.
Of particular relevance are items 2 and 3 in the table in subsection 38-190(1) of the GST Act.
Item 2 provides that supplies of things (other than goods and property) to non-resident, outside of Australia when the supply is done, are GST-free.
Item 3 provides that supplies of things (other than goods and property) to a recipient, outside of Australia when the supply is done, are also GST-free. Hence, this item can include a resident outside of Australia, as long as the use and enjoyment takes place outside of Australia.
The other rule for these items is that the supply of the thing cannot be 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.
Further information
To assist you in determining whether the recipient is in Australia, the ATO suggests, that you should obtain as a minimum:
• A declaration from the recipient, such as: 'I declare that I am not in Australia at this time and will not be making use of this supply in Australia'
• The recipients full address.
The ATO also suggest that state with the declaration the following 'Information given in the course of the transaction may be used to determine your liability to Australian GST'.
Another issue is that usually the price advertised is required to be GST inclusive so where you are mainly selling to non-resident outside of Australia the Commissioner accepts that the price may be advertised as GST exclusive, however, we suggest this be made clear on the website so as not to mislead resident purchasers.
Furthermore, where you do supply your online supply to residents and the GST inclusive price is $Y you will be required to provide a tax invoice, if requested, within 28 days. Tax invoices must be either in Australian currency or provide sufficient information to the recipient to work out the GST payable on the supply in Australian currency. For further information please refer to Goods and Services Tax: foreign exchange conversions (GSTR 2001/2). This Public Ruling can be found on the ATO external website by placing the reference in google.