Edited version of private advice

Authorisation Number: 1051612448151

Date of advice: 2 December 2019

Ruling

Subject: Supply of printing and delivery services

Question

Is the supply of printing and delivery services by A to B GST-free pursuant to item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. The supply of printing and delivery services by A to B is GST-free pursuant to item 2 in the table in subsection 38-190(1) of the GST Act.

This ruling applies for the following period:

1 October 2018 - 1 October 2022

Relevant facts and circumstances

A is an Australian based company that provides print, mail and fulfilment services.

A is registered for GST.

A entered into a Services Agreement with B for the provision of printing and delivery services.

B is a non-resident entity that does not have any presence in Australia and does not carry on a business in Australia.

B has no offices in Australia; does not operate through a fixed place in Australia; does not have employees in Australia; and does not have anybody acting in the capacity of agent on its behalf in Australia.

B is not registered or required to be registered for GST in Australia.

The arrangement between the parties operates as follows:

·        B has arranged for A to print and deliver the direct mail advertising;

• B provides A with the data to be put on the advertisements and the addresses where they are to be delivered.
• Upon receipt of the relevant data, A will print the advertisements and deliver them to the intended recipients.
• The advertisements are addressed to the household and are not addressed to any particular Australian resident entity.

The supplies acquired by B from A are not related to the making of supplies of real property situated in the indirect tax zone that would be input taxed.

A deals only with B. All instructions are provided to A by B.

For the supply of its services A charges an amount that depends on the volume of the invites printed and delivered. The price includes the cost of paper and envelopes supplied by A.

The cost of paper and envelopes, including mark-up, represents 4% to 5% of the total price per unit of the invites.

While B can supply the paper and envelopes, the additional costs incurred by A to receive and store them would mean that the price per unit is not likely to change materially.

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 38-190

Reasons for decision

GST is payable on a taxable supply.

Section 9-5 of the A New Tax System (Goods and Services tax) Act 1999 (GST Act) states:

You make a taxable supply 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 the indirect tax zone; and

(d)   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.

(* denotes a term defined under section 195-1 of the GST Act)

The supply of services by A consists of two distinct supplies as follows:

Supply of printing services

B has arranged for A to print direct mail advertising in the form of an invite to participate in the online social network. The Services Agreement provides that A will also supply envelopes and paper to be used in printing the advertisements. However, the value of the paper and envelopes represents a small proportion of the total price of the services which is unlikely to change if B supplies the paper and envelopes. Furthermore, the supply of the paper and envelopes is made subject to the printing services; that is, where there is no supply of service, there would not be a need for the supply of paper and envelopes. As such, the supply of the paper and envelopes is merely incidental to the supply of the printing services.

The supply of printing services by A is made for consideration and in the course of carrying on A's enterprise. The supply is connected with the indirect tax zone as the services are performed in the indirect tax zone. A is registered for GST. The requirements in paragraphs 9-5(a) to 9-5(d) are satisfied; thus, the supply of printing services is a taxable supply unless it is GST-free or input taxed.

There is no provision in the GST Act under which the supply of printing services by A would be input taxed.

Item 2 in the table in subsection 38-190(1) of the GST Act (item 2) provides that a supply of anything, other than goods or real property, made to a non-resident who is not in in the indirect tax zone when the thing supplied is done is GST-free if:

(a)   the supply is neither a supply of work physically performed on goods situated in the indirect tax zone when the work is done nor a supply directly connected with real property situated in the indirect tax zone; or

(b)   the non-resident acquires the thing in carrying on the non-resident's enterprise but is not registered or required to be registered.

However, in accordance with subsection 38-190(3) of the GST Act, a supply covered by item 2 is not GST-free if:

(a)   it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident; and

(b)   the supply is provided, or the agreement requires it to be provided, to another entity in the indirect tax zone; and

(c)   for a supply other than an input taxed supply - none of the following applies:

                           i.          the other entity would be an Australian-based business recipient of the supply, if the supply had been made to it;

                          ii.          the other entity is an individual who is provided with the supply as an employee or officer of an entity that would be an Australian-based business recipient of the supply, if the supply had been made to it; or

                         iii.          the other entity is an individual who is provided with the supply as an employee or officer of the recipient, and the recipient's acquisition of the thing is solely for a creditable purpose and is not a non-deductible expense.

An Australian-based business recipient is an entity that is registered for GST, is carrying on its enterprise in Australia, and its acquisition of the thing supplied is not solely of a private or domestic nature.

The supply of printing services is made to B who does not have any presence in the indirect tax zone and is not carrying on its enterprise in the indirect tax zone. B is not registered or required to be registered for GST. Therefore, the supply of printing services by A is GST-free under item 2.

The Services Agreement does not require A to provide the printing services to another entity. A deals directly with or get instructions from B. The supply of services is not provided by A to another entity in the indirect tax zone; therefore, subsection 38-190(3) of the GST Act does not apply to negate the GST-free status of the supply.

Supply of delivery services

The supply of delivery services by A is also covered by item 2; and is GST-free unless subsection 38-190(3) of the GST Act applies.

The Services Agreement does not require A to provide the delivery services to another entity in the indirect tax zone.

Goods and Services Tax Ruling GSTR 2005/6 explains the operation of subsection 38-190(1) of the GST Act.

Paragraph 75 of GSTR 2005/6 provides that in the case of delivery or freight services where goods from one entity are addressed for delivery to another entity, the delivery or freight services are provided to that addressee entity. Accordingly, if the goods are addressed to an individual in Australia, the services are provided to that individual in Australia. However, paragraph 378 provides that it does not include the delivery of goods that are generically addressed to 'The Householder' or are for delivery to the public at large.

The advertisements that A prints and delivers are addressed to the household rather than to a particular resident entity in Australia. Therefore, the supply of delivery services is not provided by A to another entity in Australia. Subsection 38-190(3) of the GST Act does not apply to negate the GST-free status of the supply.