Issue
Is the entity, a business operator in the Information Technology (IT) industry, liable for any GST amount under subsection 84-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it acquires an IT industry domain name from a non-resident overseas supplier solely for a creditable purpose?
Decision
No, the entity is not liable for any GST amount under subsection 84-10(1) of the GST Act when it acquires an IT industry domain name from a non-resident overseas supplier solely for a creditable purpose.
Facts
The entity is a business operator in the IT industry. As a part of its business the entity acquires domain names' by reserving them from suppliers of domain name registrations and then supplies the domain names to its clients.
The entity reserves a domain name from a non-resident overseas supplier of domain names registrations and then supplies this domain name, in the course of its enterprise, to its resident Australian client. The acquisition of the domain name by the entity is solely for a creditable purpose.
The non-resident overseas supplier's reservation of the domain name is not done in Australia nor is it supplied through an enterprise that the non-resident overseas supplier is carrying on in Australia.
The entity is registered for goods and services tax (GST).
Reasons for Decision
Division 84 of the GST Act applies to supplies not connected with Australia.
Subsection 9-25(5) of the GST Act provides that a supply of anything other than goods or real property is connected with Australia if either: (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) all of the following apply: (i) neither paragraph (a) nor (b) applies in respect of the thing; (ii) the thing is a right or option to acquire another thing; (iii) the supply of the other thing would be connected with Australia.
In this case, the reservation of domain name is an intangible supply and not a supply of goods or real property. Furthermore, the supply is not connected with Australia as the non-resident overseas supplier's reservation of the domain name is not done in Australia nor is it supplied through an enterprise that the non-resident overseas supplier is carrying on in Australia nor is it a right or option to acquire another thing. Therefore, the supply is appropriately considered under Division 84 of the GST Act.
Under section 84-5 of the GST Act, a supply of anything other than goods or real property that is a supply not connected with Australia, is a taxable supply if: • the recipient of the supply acquires the thing supplied solely or partly for the purpose of an enterprise that the recipient carries on in Australia, but not solely for a creditable purpose; and • the supply is for consideration; and • the recipient is registered, or required to be registered.
Where a supply is a taxable supply under section 84-5 of the GST Act, the GST amount payable on that supply is payable by the recipient of the supply (subsection 84-10(1) of the GST Act).
In this case, the acquisition of the domain name by the entity is solely for a creditable purpose. As such, section 84-5 of the GST Act does not apply and the entity is not liable to pay any GST amount under subsection 84-10(1) of the GST Act when it acquires an IT industry domain name from a non-resident overseas supplier solely for a creditable purpose. [HISTORY: This ATO ID was amended on 25 June 2007 to reflect changes in legislation]