Edited version of private advice

Authorisation Number: 1051925595932

Date of advice: 7 March 2022

Ruling

Subject: GST and precious metals

Question

Are the following materials that are purchased by the entity 'precious metals' for the purpose of section 195-1 of the A New System (Goods and Services Tax) Act 1999 (GST Act)?

a.            Silver bangles/bracelets

b.            Electrical nodes

c.            Silver foil

d.            Canadian Maple silver coins

Answer

The silver bangles/bracelets, electrical nodes and silver foil are not precious metals for the purpose of section 195-1 of the GST Act.

The Canadian Maple silver coins are precious metals for the purpose of section 195-1 of the GST Act.

This ruling applies for the following period:

XX Month 20XX - XX Month 20XX

Relevant facts and circumstances

The entity is a precious metal refiner.

The entity purchases, from time to time, materials for their precious metal content including silver bangles/bracelets, electrical nodes and Canadian Maple silver coins shown below:

An electrical node is a conductive juncture between or within an electrical circuit. A silver electrical node is the same thing fashioned from silver.

The entity also purchases silver foils in rolls.

The purchase of that materials is based on a spot or market price; and consignments and batches are subject to price fluctuations dependent on purity and the precious metal markets. For example, the entity may purchase silver bangles or silver electrical nodes of varying degrees of fineness to refine these metals further. The seller sets a price based on their declaration of purity for payment pre-delivery. On delivery, an assay is done for the entity to determine the actual fineness of the materials and an adjustment is made.

For the purpose of this ruling, the materials referred to are of 99.9% fineness.

The entity acquires the materials from companies specialising in the aggregation and wholesale of the materials.

The entity provided documents for the purchase of the Canadian Maple silver coins from a worldwide dealer of gold and silver bullion. Information available from the dealer's website show that the Canadian Maple silver coins bear a mark of their 99.99% fineness and their purity being fine silver.

The entity provided a document for the purchase of silver foil from an energy investment company in Australia.

On acquisition, the entity will inspect, melt, assay, report and refine the materials amongst other steps.

The refined product may be refined granules, bars, blocks, bullion, coins, or other forms of refined precious metal materials.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

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

'precious metal' means:

(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: What is 'precious metal' for the purposes of GST? (GSTR 2003/10) covers precious metal for GST purposes. At paragraph 9 of GSTR 2003/10 it states that no regulations have been made to specify any other substance. To be precious metal for GST purposes, the metal must therefore be gold, silver or platinum and of a specified fineness. The gold, silver or platinum must also be in an investment form.

Metal silver

In this case, the materials are made of the metal silver and they are of the 99.9% fineness which meets the fineness requirement to be precious metal. To be precious metal for GST purposes, apart from meeting the fineness requirement for the specific metal, the metal also needs to be in 'investment form'

Investment form

What is 'in an investment form' is not defined in the GST Act, it will therefore take its ordinary meaning. The expression is covered under paragraphs 14 to 28 of GSTR 2003/10.

Paragraph 29 of GSTR 2003/10 provides that in summary, for gold, silver or platinum to be in an 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 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.

This view is supported by the Explanatory Memorandum (EM) to the Bill for the Act that added the words 'in an investment form' to the definition of precious metal in section 195-1, which says:

In order to ensure that the correct supply of precious metal is GST-free or input taxed, the definition of 'precious metal' has been amended to refer to sales of precious metals in an investment form. Investment form means precious metal sold in a wafer, bar or other tradeable form which has an internationally accepted hallmark. In the case of gold, this means a hallmark that has been approved by the London Bullion Market and means that the gold can be traded on the international bullion market.

Bars, wafers and bullion coins are the physical forms in which the metals gold, silver and platinum are traded on the international bullion market for those metals. These are the forms that are capable of being traded on the international bullion market.

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. An example of a mark is a hallmark used on bars. An example of a mark is a hallmark used on bars. Granules do not bear any mark as to their fineness and quality and are therefore not in an investment form. On the other hand, gold bars bearing an internationally accepted hallmark, including hallmarks listed in the Industry Catalogue of Gold Bars Worldwide (ICGB), do bear such a mark and are therefore instantly accepted on the international bullion market as to their guaranteed fineness and quality.

Silver bangles/bracelets, electrical nodes and silver foil

While the entity purchases the materials based on the spot price for silver, the silver bangle/bracelets, electrical nodes and silver foil are not bars, wafers or coins that are tradeable on the international bullion market.

Furthermore, the silver bangles/bracelets, electrical nodes and silver foils do not bear some mark or characteristic on its face accepted by the market as identifying and guaranteeing its fineness and quality. This is supported by the fact that the entity, upon delivery of the materials it purchases, performs an assay to determine the actual fineness of the materials and makes adjustment to the price.

Accordingly, the silver bangles/bracelets, electrical nodes and silver foil are not precious metals for the purpose of section 195-1 of the GST Act.

Canadian Maple silver coin

The Canadian Maple silver coin is in a physical form (coin) that is capable of being traded on the international bullion market.

The Canadian Maple silver coin is produced by a London Bullion Market Association (LBMA) accredited refiner for silver therefore bears a hallmark that is accepted as identifying and guaranteeing fineness and quality being 99.99% fine silver.

Furthermore, the entity purchases the Canadian Maple silver coin based on the spot price for silver.

Accordingly, the Canadian Maple silver coin is a precious metal for the purpose of section 195-1 of the GST Act.