Issue
Is the entity, a supplier of services, 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, under an agreement with a non-resident company, the entity provides technical support services to Australian based customers of the non-resident company?
Decision
No, the entity is not making a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act when, under an agreement with a non-resident company, the entity provides technical support services to Australian based customers of the company.
The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a supplier of technical support services for computer software. An agreement exists between the entity and a non-resident company for the entity to provide technical support services to Australian based customers of the non-resident company. The non-resident company operates overseas.
The entity is located in Australia and supplies these technical support services from Australia.
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.
Reasons for Decision
Under section 38-190 of the GST Act, certain supplies of things other than goods or real property, for consumption outside of Australia, are GST-free.
The entity provides technical support services for computer software to a non-resident company that operates overseas. As the supply of these services is not considered to be a supply of goods or real property, the GST status of the services is appropriately considered under section 38-190 of the GST Act.
Paragraph (a) of item 2 in the table in subsection 38-190(1) of the GST Act (Item 2) provides that a supply, other than a supply of goods or real property is GST-free where: • it is made to a non-resident who is not in Australia when the thing supplied is done; and • it is not a supply of work physically performed on goods situated in Australia when the work is done and it is not a supply directly connected with real property situated in Australia.
The supply of the technical support services satisfies the above requirements.
However, subsection 38-190(3) of the GST Act provides that a supply which is 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.
The supply of the technical support services is made under an agreement entered into between the entity and the non-resident company. In addition, under this agreement, the supply of the services is to be provided to customers who are located in Australia. Accordingly, subsection 38-190(3) of the GST Act excludes the supply of technical support services as a GST-free supply under Item 2.
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 any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply, when under an agreement with a non-resident company, the entity provides technical support services to Australian based customers of the non-resident company.