Issue
Is the entity, a manufacturer of car parts, making a GST-free supply under subsection 38-510(4) of the A New Tax System (Goods & Services Tax) Act 1999 (GST Act), when it sells a car part to a business entity that on sells the car part to a person with disabilities?
Decision
No, the entity is not making a GST-free supply under subsection 38-510(4) of the GST Act when it sells a car part to a business entity that supplies the car part to a person with disabilities. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a manufacturer of car parts.
The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.
The entity sells a car part to a business entity that on sells the car part to an individual. The individual is a person with disabilities who satisfies the requirements of subsection 38-510(1) of the GST Act.
Reasons for Decision
Under Subdivision 38-P of the GST Act, a supply of car parts to a person with disabilities may be GST-free. Subsection 38-510(4) of the GST Act sets out the requirements for a supply of car parts that are for a person with disabilities to be GST-free.
Under subsection 38-510(4) of the GST Act, the supply of the car parts must be made to an individual who is a person with disabilities who meets the requirements of subsection 38-510(1) of the GST Act.
In this case, the supply is to a business entity, rather than to an individual who meets the requirements of subsection 38-510(1) of the GST Act. Therefore, the entity is not making a GST-free supply of a car part under subsection 38-510(4) of the GST Act.
The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it sells a car part for a car to a business entity that on sells the car part to a person with disabilities.