Edited version of private advice

Authorisation Number: 1052318232974

Date of advice: 21 October 2024

Ruling

Subject:GST - acquisition of authentication and grading services

Question

Are you entitled to input tax credits under section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) on your purchase of authentication and grading services (the services) from X?

Answer

No.

Relevant facts and circumstances

You have been registered for GST since (date).

You are a resident of Australia.

You carry on a business in a certain industry in Australia. You have a shop in Australia.

X authenticates and grades items. X operates its business solely in a foreign country.X performs its authentication and grading services in the foreign country.

A number of years ago, you entered into a Dealer Agreement with X under which you act as an intermediary between X and the owners of the items who have their items authenticated and graded by X. You are referred to as an X Dealer. Under this arrangement, you sell the services to item owners in your own right and get X to perform the services. Such arrangement makes X your subcontractor.

An item owner in Australia sends collectible items to you to be authenticated and graded and you forward these items to X so that they can do the authentication and grading.

X also supplies item authentication and grading services directly to Australian private individuals.

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 11-5

A New Tax System (Goods and Services Tax) Act 1999 section 11-15

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

A New Tax System (Goods and Services Tax) Act 1999 section 29-10

Reasons for decision

Section 11-20 of the GST Act provides that you are entitled to input tax credit on any creditable acquisition that you make.

Section 11-5 of the GST Act states:

You make a creditable acquisition if:

(a) you acquire anything solely or partly for a *creditable purpose; and

(b) the supply of the thing to you is a *taxable supply and

(c) you provide, or are liable to provide, *consideration for the supply; and

(d) you are *registered or *required to be registered for GST.

Whether you acquire the services for a creditable purpose

Subsection 11-15(1) of the GST Act states

You acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise

Subsection 11-15(2) of the GST Act states:

However, you do 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

You acquire X's services in carrying on your enterprise. Your acquisitions of these services do not relate to you making supplies that would be input taxed and they are not of a private or domestic nature. Therefore, you acquire the services for a creditable purpose. Hence, the requirement of paragraph 11-5(a) of the GST Act is met.

Whether supplies of services by X to you are taxable supplies

GST is payable by you on taxable supplies that you make, in accordance with section 9-40 of the GST Act.

Section 9-5 of the 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) the supplier is *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.

(The indirect tax zone includes most of Australia).

X supplies item authentication and grading services to you for consideration and in the course or furtherance of an enterprise that it carries on. Therefore, the requirements of paragraphs 9-5(a) and 9-5(b) of the GST Act are met.

Whether supplies of services by X to you are connected with Australia

A supply of something other than goods or real property is connected with Australia if the requirements of paragraph 9-25(5)(a), 9-25(5)(b), 9-25(5)(c) or 9-25(5)(d) of the GST Act is met. Paragraph 9-25(5)(c) is not relevant to the situation in question.

Paragraph 9-25(5)(a) of the GST Act provides that a supply is connected with Australia if the thing supplied is done in Australia. PSA performs the services outside Australia. Therefore, the thing supplied by X is not done in Australia.

Paragraph 9-25(b) of the GST Act provides that a supply is connected with Australia if the supplier makes the supply through an enterprise that it carries on in Australia. X operates outside Australia. Therefore, it does not supply the services through an enterprise that it carries on in Australia.

Paragraph 9-25(d) of the GST Act provides that a supply of something other than goods or real property is connected with Australia if the recipient of the supply is an Australian consumer.

Subsection 9-25(7) of the GST Act provides that an entity is an Australia consumer of a supply made to the entity if:

(a) the entity is an Australian resident; and

(b) the entity is not registered for GST and/or it does not acquire the thing for the purpose of an enterprise

that it carries on.

You are not an Australian consumer because you are registered for GST and you acquire the services from X for the purpose of an enterprise that you carry on.

Therefore, X's supplies of services to you are not connected with Australia.

Whether X is registered or required to be registered for GST

You do not know whether X is registered or required to be registered for GST. Therefore, it is not clear whether the requirement of paragraph 9-5(d) of the GST Act is met.

Provision of consideration for X's supplies

You provide, and are liable to provide, consideration for X's supplies to you. Therefore, you meet the requirement of paragraph 11-5(c) of the GST Act.

Your GST registration

You are registered for GST. Therefore, you meet the requirement of paragraph 11-5(d) of the GST Act.

Conclusion

Regardless of whether or not X is registered or required to be registered for GST, their supplies of the services to you are not connected with Australia and therefore, these supplies are not taxable supplies. Therefore, you do not meet the requirement of paragraph 11-5(b) of the GST Act.

As not all of the requirements of section 11-5 of the GST Act are met, you are not entitled to input tax credits on your acquisition of the services from X.