GST and web site marketing services to non-residents

Is the entity, an Australian based web site holder, making a GST-free supply under item 2 of subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it provides marketing services to a non-resident company?

Yes, the entity is making a GST-free supply under item 2 of subsection 38-190(1) of the GST Act, when it provides marketing services to a non-resident company.

The entity, an Australian based web site holder, provides marketing services to a non-resident company. The entity does this by providing a link on its web-site to the non-resident company's web-site.

Then, where a successful sale is made, the non-resident company provides a commission to the entity for introducing clients to the non-resident company through the entity's web site.

The non-resident company is not in Australia when the supply is made. The marketing services do not relate to goods or property situated in Australia.

The entity is registered for goods and services tax (GST). Its enterprise is carried on in Australia. The entity, in the course of its enterprise, provides marketing services. The services are provided for consideration.

Subsection 38-190(1) of the GST Act specifies the circumstances where the supply of things other than goods or real property, for consumption outside Australia will be GST-free. Marketing services are not goods or real property, and its GST status is appropriately considered under subsection 38-190(1) of the GST Act.

Under item 2 of subsection 38-190(1) of the GST Act, a supply that is made to a non-resident who is not in Australia when the thing supplied is done, is GST-free where: (a) the supply is neither 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; 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.

From the facts in this case, the entity is making a supply of marketing services to a non-resident entity. The non-resident company is not in Australia when the supply is made and the services do not relate to goods or property situated in Australia.

Therefore, the supply of the marketing services from the web site holder is GST-free under item 2 of subsection 38-190(1) of the GST Act.