GST and supplies of consultancy services to non-residents

Is the entity, an Australian consultancy organisation, making a GST-free supply under item 2 in the table in subsection 38-190(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies consultancy services to a non-resident company?

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

The entity is an Australian resident consultancy organisation. The entity supplies consultancy services to a non-resident company. The entity is registered for goods and services tax (GST).

The non-resident company is not in Australia when the consultancy services are performed. It does not have a representative in Australia in relation to the supply when the consultancy services are performed.

The consultancy services do not relate to goods or real property situated in Australia.

The non-resident company acquires the consultancy services in carrying on its enterprise. It is not registered for GST and is not required to be registered for GST.

There is no third party in Australia involved in the supply and the consultancy services are provided to the non-resident company.

Under section 38-190 of the GST Act, certain supplies of things other than goods or real property for consumption outside Australia are GST-free. As the supply of consultancy services is not a supply of goods or real property, its GST status is appropriately considered under section 38-190 of the GST Act.

Item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) provides that a supply that is made to a non-resident who is not in Australia when the thing supplied is done, is GST-free where: • 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 • the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered for GST.

The non-resident company is not in Australia when the consultancy services are performed and the precondition that the recipient of the supply is not in Australia is satisfied.

Therefore, if either of the remaining requirements in Item 2 are satisfied the entity's supply will be GST-free. The consultancy services do not relate to goods or real property situated in Australia. In addition, the non-resident company acquires the consultancy services in carrying on its enterprise and it is neither registered nor required to be registered for GST. Therefore, the entity's supply of consultancy services to the non-resident company meets both of the requirements in Item 2 (although it only needs to satisfy one of them to be GST-free).

However, subsection 38-190(3) of the GST Act provides that a supply covered by Item 2 is not GST-free if: • it is a supply under an agreement entered into, whether directly or indirectly, with a non-resident, and • the supply is provided, or the agreement requires it to be provided, to another entity in Australia.

There is no third party in Australia involved in the supply and the consultancy services are provided to the non-resident company. As such, the entity is not providing its supply of consultancy services to an entity in Australia and subsection 38-190(3) of the GST Act does not exclude the entity's supply from being GST-free under Item 2.

Accordingly, the entity is making a GST-free supply under Item 2 when it supplies consultancy services to the non-resident company.