Edited version of your written advice

Authorisation Number: 1051360671520

Date of advice: 18 April 2018

Ruling

Subject: GST and supply made to a non-resident company

Question 1

Is the supply made by the Australian company to the overseas company a GST-free supply under the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as per contract entered into by the two companies?

Advice

The Australian company makes two distinct supplies under the contract with the overseas company:

1. a supply of goods - the supply of goods is not connected with Australia and therefore outside the scope of GST.

2. a supply of services – the supply of services is GST-free under item 1 in the table in subsection 38-190(1) of the GST Act.

Relevant facts

You are an Australian company and registered for GST.

You have entered into a Supply Contract (contract) with an overseas company in regard to assisting in the construction of some building overseas.

You have provided us a copy of the contract. Under the contract your responsibility is:

● Supply equipment, materials and manpower etc. and deliver such equipment and material to Site as necessary.

● Provide and manage labour, supervision, consumables, tools and apparatus to completely install the system described in the Appendices.

● Manage and deliver the equipment and material mentioned above to the Site, Store, position, install and protect until handed over to the owner.

● Properly interface with other Sub-Contractors in order to deliver a complete working system, to design specifications.

● Properly handle equipment and materials provided

● Provide payment requests and invoices according to the terms set out in the contract.

● Provide technical support and assistance when and where necessary.

● Properly manage trash and surplus materials on Site.

You have appointed an overseas company to design the equipment for you. All materials and equipment are supplied and sourced from outside Australia and sent to the overseas site.

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 38-190

Reasons for decision

Note: Where the term ‘Australia’ is used in this document, it is referring to the ‘indirect tax zone’ as defined in section 195-1 of the GST Act.

GST is payable on a taxable supply. A supply is a taxable supply under section 9-5 of the GST Act if:

a. the supplier makes the supply for consideration; and

b. the supply is made in the course or furtherance of an enterprise that the supplier carries on; and

c. the supply is connected with Australia; and

d. the supplier is 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 must be satisfied for your supply under the contract to be a taxable supply.

From the information given, your supply to the overseas company satisfies paragraphs (a), (b) and (d) of section 9-5 of the GST Act as:

● you make your supply for consideration; and

● the supply is made in the course of a business that you carry on; and

● you are registered for GST.

Next is to consider whether your supply is connected with Australia under paragraph 9-5 (c) of the GST Act.

Paragraph 9-5(c) of the GST Act

Section 9-25 of the GST Act defines when a supply is ‘connected with Australia’.

For the purposes of determining whether a supply is connected with Australia, section 9-25 of the GST Act makes a distinction between a supply of goods, a supply of real property and a supply of anything other than goods or real property.

Accordingly, we need to determine the character of your supply under the contract before determining whether your supply is connected with Australia.

Characterisation of supply

Taking into consideration all information received, we consider you make two distinct supplies to the overseas company:

1. supply of goods (equipment and materials);

2. supply of services (supervision and inspection of the equipment and materials including their installation to the buildings).

Supply of goods

A supply of goods is connected with Australia if any of the following applies:

● 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 imports the goods into Australia (subsection 9-25(3) of the GST Act);

● From 1 July 2018 the supply of goods is an offshore supply of low value goods under Subdivision 84-c of the GST Act (subsection 9-25(3A) of the GST Act).

From the facts given, none of the above applies to your supply of goods to the overseas company since the goods are supplied and sourced from outside Australia..

In this instance your supply of goods is not connected with Australia and therefore outside the scope of GST.

Supply of services

Relevant to your supply of services is subsection 9-25(5) of the GST Act.

Under subsection 9-25(5) of the GST Act, a supply of anything other than goods or real property is connected with Australia if:

a) the thing is done in Australia; or

b) the supplier makes the supply through an enterprise that the supplier carries on in Australia; or

c) neither paragraph (a) nor (b) applies in respect of the thing and the thing is a right or option to acquire another thing which would be connected with Australia when the other thing is supplied; or

d) the recipient of the supply is an Australian consumer (Australian resident not registered for GST or registered and the acquisition is for private purposes).

Your supply of services is connected under paragraph 9-25(5)(b) of the GST Act as the services are made through a business that you carry on in Australia.

Accordingly, your supply of services will be a taxable supply to the extent that it is not GST-free. There is no provision that makes your supply of services input taxed.

GST-free supply

Under item 1 in the table in subsection 38-190(1) of the GST Act (item 1), a supply of thing other than goods or property is GST-free if the supply is directly connected with goods or real property situated outside Australia.

According to Goods and Services Tax Ruling GSTR 2003/7, where a supply has a direct connection with goods or real property, or is a supply of work physically performed on goods, the location of the goods or real property is the basis upon which the GST treatment of the supply is determined under item 1. If the goods or real property are located outside Australia, the supply of the thing is GST-free under item 1.

From the facts given, your supply of services is directly connected with goods and real property situated outside Australia as the services are for the supervision and inspection of the equipment and materials located outside Australia including their installation to the buildings located at an overseas specific site.

Your supply of services is therefore GST-free under item 1.

Summary

You make two distinct supplies under the contract – a supply of goods and a supply of services.

Your supply of goods is not connected with Australia and therefore outside the scope of GST.

Your supply of services is GST-free under item 1.